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Celanese (CE) Beats Earnings and Revenue Estimates in Q1

Zacks

Celanese Corporation CE, a chemical and advanced materials producer, kept its earnings streak alive with a beat in first-quarter 2017.

The company logged adjusted earnings per share of $1.81 in the reported quarter, down 1.1% from $1.83 reported a year ago. The figure was, however, above the Zacks Consensus Estimate of $1.71.

Celanese reported sales of $1,471 million for the quarter, up roughly 4.8% year over year. Sales, however, also beat the Zacks Consensus Estimate of $1,456 million.

Celanese Corporation Price, Consensus and EPS Surprise

Celanese Corporation Price, Consensus and EPS Surprise | Celanese Corporation Quote


Segment Review

Material Solutions: The unit witnessed a record high volume due to the commercialization of new pipeline opportunities and growth in Asia. Within this segment, the Advanced Engineered Materials unit delivered its second highest fourth-quarter ever operating profit of $98 million and record adjusted EBIT of $143 million.

With the launch of 513 projects in the first quarter, the number of projects increased 70% compared with prior quarter thus demonstrating the success of the pipeline model. The impact of Reduced tow volume and pricing more than offset productivity improvements and increased flake volume in the quarter.

The Consumer Specialties unit maintained profitability on a year-over-year basis.

Acetyl Chain: The unit was able to manage operating margin and profitability in the quarter despite a challenging environment. Volume was lower as compared to the prior-year quarter as on the back of choice as a result of the move to sell less VAM in China due to competitive dynamics.

Operating margin was lower in first-quarter 2017 sequentially due to charges related to the Nanjing, China ethanol facility. Industry conditions are expected to improved through the first quarter which augurs well for profitability going forward.

Financials

Cash and cash equivalents were $501 million as of Mar 31, 2017, down 30.02% year over year. Long-term debt was up 14.6% to $2,851 million as of Mar 31, 2017. Capital expenditure in the quarter was $62 million.

Celanese generated operating cash flow of $192 million and free cash flow of $126 million in 1Q17 in the quarter. During the quarter, the company returned $179 million to its shareholders, including $128 million in share buy backs and $51 million of dividends.

Outlook

Celanese sees adjusted earnings per share to increase 8–11% in 2017. Advanced Engineered Materials is also expected to continue to grow offsetting the decline in tow earnings. The Acetyl Chain is anticipated to benefit from a volatile raw materials backdrop and the current industry environment is expected to improve profits as the year progresses.

Price Performance

Celanese’s shares rallied 10.1%, in the last three months, outperforming the Zacks categorized Chemicals-Diversified industry’s 3.6% gain.

Zacks Rank & Stocks to Consider

Celanese currently carries a Zacks Rank #3 (Hold).

Better-ranked companies in the chemical space include Univar Inc. UNVR, The Chemours Company CC and Kronos Worldwide Inc KRO. All the three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Univar has expected long-term growth of 9.4%.

Chemours has expected long-term growth of 15.5%.

Kronos has expected long-term growth of 5%.

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