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Why Is Celanese (CE) Up 16.4% Since Last Earnings Report?

It has been about a month since the last earnings report for Celanese (CE). Shares have added about 16.4% in that time frame, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Celanese due for a pullback? 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 catalysts.

Celanese's Earnings and Sales Surpass Estimates in Q3

Celanese logged earnings from continuing operations of $1.76 per share in third-quarter 2020, down from $2.17 in the year-ago quarter.

Barring one-time items, adjusted earnings were $1.95 per share, down from $2.53 in the year-ago quarter. However, the figure surpassed the Zacks Consensus Estimate of $1.69.

Revenues of $1,411 million fell 11% year over year, but beat the Zacks Consensus Estimate of $1,360.7 million.

Segment Review

Net sales in the Engineered Materials unit were $526 million in the quarter, down 11% year over year. The segment witnessed sequentially higher volumes on the back of strong demand recovery for durable goods across all regions.

The Acetyl Chain segment posted net sales of $776 million, down 10.5% year over year. Per the company, pricing for VAM and acetic acid remained depressed in the quarter as the benefits of demand recovery on industry utilization was largely offset by considerably improved industry supply.

Net sales in the Acetate Tow segment were $129 million, down 18.4% year over year.

Financials

Celanese ended the quarter with cash and cash equivalents of $615 million, up 23.7% year over year. Long-term debt fell 6.5% year over year to $3,140 million.

Celanese generated operating cash flow of $431 million and free cash flow of $351 million in the quarter. Capital expenditures amounted to $72 million in the quarter.

Outlook

Celanese stated that the global demand during the third quarter progressed toward recovery across most of its end markets. The company is assessing the impact of the resurgence of COVID-19 across various regions on its businesses. It expects the momentum witnessed in the third quarter to continue in the fourth quarter, which is expected to partly offset various headwinds including a major turnaround at its Frankfurt POM facility and normal seasonality in December.

For 2020, the company expects adjusted earnings of around $7-$7.10 per share. Celanese is focused on controllable actions to drive strong growth next year amid uncertainties. This includes production planning, productivity and disciplined capital deployment.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended downward during the past month. The consensus estimate has shifted -6.43% due to these changes.

VGM Scores

Currently, Celanese has an average Growth Score of C, though it is lagging a bit on the Momentum Score front with a D. Charting a somewhat similar path, the stock was allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. 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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