Celanese (CE) Up 19% in a Year: What’s Going in its Favor?

Shares of Celanese Corporation CE have moved up around 19.1% in the past year compared with the industry’s rise of roughly 5.6%.

Celanese, a Zacks Rank #1 (Strong Buy) stock, has a market cap of roughly $15.7 billion. Average volume of shares traded in the past three months was around 917.6K. The company has expected long-term earnings per share growth of 10%.

Let’s take a look at the factors that are driving this chemical company.

Driving Factors

An impressive second quarter, upbeat outlook, strength in Engineered Materials (EM) and Acetyl Chain units along with strategic measures including acquisitions and operational cost savings have contributed to the rally in Celanese’s shares.

In the second quarter, Celanese’s earnings jumped 47% year over year to $2.52 per share and adjusted earnings surged 62% to $2.90. The figure also surpassed the Zacks Consensus Estimate of $2.40. Revenues rose roughly 22% year over year to $1,844 million in the quarter, outpacing the Zacks Consensus Estimate of $1,789 million.

In its second-quarter earnings call, Celanese stated that it expects the momentum in Acetyl Chain to continue in the third quarter. The project pipeline also continues to advance in EM. Moreover, the company expects to deliver free cash flow of more than $1 billion in the year.

Sales and income from the EM units jumped year over year in the second quarter supported by growth in Asia and the Americas, better product mix, recent acquisitions and project commercialization. Celanese commercialized 733 projects in the EM segment during the second quarter, up 34% year over year, and is on track to deliver nearly 3,000 project wins in 2018.

Celanese is also focused on growth through acquisitions. The purchase of Italy-based SO.F.TER. Group strengthened Celanese’s solutions capability and project pipeline. Moreover, the acquisition of Nilit's nylon compounding unit is in sync with Celanese’s plans to become a leading nylon compound supplier. The buyout enables the company to extend global leadership position in the EM business as nylon continues to be adopted in automotive, consumer and industrial applications.

Moreover, the recent buyout of Omni Plastics reinforces Celanese’s global asset base by adding compounding capacity in the Americas, which will allow the company to continue supporting a diverse and growing customer base.

The company raised its adjusted EPS guidance for 2018 to roughly $10.50-$10.75 factoring in strength across the EM and Acetyl Chain units. The company’s strategic initiatives including cost savings through productivity actions and efficiency enhancement are expected to continue to drive earnings.

Other Stocks to Consider

Other top-ranked stocks in the basic materials space include Ingevity Corporation NGVT, Huntsman Corporation HUN and Air Products and Chemicals, Inc. APD.

Ingevity has an expected long-term earnings growth rate of 12% and carries a Zacks Rank #1. Shares of the company have rallied 56.3% in a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Huntsman has an expected long-term earnings growth rate of 8.5% and a Zacks Rank #1. The stock has gained 14.5% in a year.

Air Products has an expected long-term earnings growth rate of 16.1% and a Zacks Rank #2 (Buy). Shares of the company have risen 14.4% in a year’s time.

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