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Celanese (CE) Down 10.6% Since Last Earnings Report: Can It Rebound?

A month has gone by since the last earnings report for Celanese (CE). Shares have lost about 10.6% in that time frame, underperforming the S&P 500.

Will the recent negative trend continue leading up to its next earnings release, or is Celanese due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.

Celanese's Q1 Earnings Top Estimates, Revenues Trail

Celanese logged earnings from continuing operations of $2.64 per share in first-quarter 2019, down from $2.68 in the year-ago quarter.

Barring one-time items, adjusted earnings were $2.62 a share, down from $2.79 in the year-ago quarter. It, however, topped the Zacks Consensus Estimate of $2.49.

Revenues of $1,687 million fell roughly 9% year over year and lagged the Zacks Consensus Estimate of $1,769.6 million. Sales were impacted by lower volumes and prices. The chemical maker witnessed a challenging business environment during the quarter.

Segment Review

Net sales in the Engineered Materials unit were $663 million in the quarter, flat year over year. Higher pricing and improved sales mix were offset by lower volumes and unfavorable currency impact. The company commercialized 1,075 projects during the quarter, up 45% year over year.   

Net sales in Acetate Tow segment were $166 million, flat year over year. Sales were impacted by reduced volumes due to lower global industry utilization.

The Acetyl Chain segment posted net sales of $889 million, down around 15% year over year. Sales were impacted by reduced volumes and pricing due to lower global demand.

Financials

Celanese ended the quarter with cash and cash equivalents of $441 million, down around 10% year over year. Long-term debt was down roughly 12% year over year to $2,933 million.

Celanese generated operating cash flow of $307 million and free cash flow of $224 million during the quarter. Net capital expenditure was $79 million for the quarter.

Outlook

Celanese backed its adjusted earnings per share guidance of roughly $10.50 for 2019, considering that underlying fundamentals will start to improve later this year.  

The company does not expect a significant improvement in demand in the second quarter and expects second-quarter performance to be similar to the first quarter. Celanese will continue to invest in its businesses and further expand its capability to boost growth and create value for shareholders.
 

How Have Estimates Been Moving Since Then?

It turns out, fresh estimates have trended downward during the past month.

VGM Scores

At this time, Celanese has a strong Growth Score of A, though it is lagging a lot on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.

Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. Notably, Celanese has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.


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