Celanese Bumps Up Share Buyback

Chemical and advanced materials maker Celanese (CE) said that its Board has raised its share repurchase authorization to $400 million. At the end of 2013, the company had authorization to buyback shares worth $228 million under its earlier authorizations.

The increase in share repurchase authorization testifies Celanese’s ability to generate strong cash flows. The authorization provides it discretion in determining the timing and conditions under which shares may be bought back.

Investors responded positively and the Texas-based company’s shares rose as much as around 3.7% in the trading session last Friday.

Celanese continues to generate strong cash flows and remains focused on returning value to its shareholders. Its cash flow from operating activities rose around 6% year over year to $762 million in 2013 (including $154 million in the fourth quarter) on the back of strong earnings.

Celanese deployed $164 million of cash to buyback roughly 3.2 million shares in 2013 and raised its annual dividend twice during the year. The company ended the year with cash and cash equivalents of $984 million, up roughly 3% year over year.

Celanese expects earnings growth on the back of company-specific initiatives, to be consistent with its long-term growth plan. These initiatives, including innovation of new products and enhancement of efficiencies through productivity, are expected to drive earnings in 2014.

Celanese is focusing on trimming costs and running its plants more efficiently to counter weak demand. Moreover, it is aggressively expanding capacity in the emerging Asian markets. The company’s strong presence in these markets should enable it to deliver incremental earnings this year and next.

Celanese is a Zacks Rank #3 (Hold) stock.

Other companies in the chemical industry worth considering include Methanex Corp. (MEOH), Northern Technologies International Corp. (NTIC) and The Dow Chemical Co. (DOW). While both Methanex and Northern Technologies carry a Zacks Rank #1 (Strong Buy), Dow Chemical holds a Zacks Rank #2 (Buy).