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Celanese (CE) Gains on Cost Actions Amid Demand & Pricing Woes

Celanese Corporation CE is benefiting from its cost and productivity measures, investments in organic projects, expansion actions and strategic acquisitions amid headwinds from demand softness in certain end markets and pricing pressure.

Shares of this leading chemical and specialty materials maker are up 22.3% over a year compared with a 13% decline of its industry.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research


 

Celanese, a Zacks Rank #3 (Hold) stock, remains focused on executing its productivity programs that include the implementation of a number of cost reduction capital projects. Productivity actions are expected to support to its margins in 2024.

The company is proactively implementing strategic initiatives recognizing the volatility and unpredictability of the current market landscape and competitive environment. These actions involve strengthening its commercial teams, aligning production and inventory levels with prevailing demand, implementing cost-saving measures and optimizing cash flow. These endeavors are expected to result in strong cash generation and a continuation of earnings growth.

Moreover, CE is actively pursuing acquisitions, which are providing it opportunities for additional growth, investment and synergies. The acquisition of the majority of DuPont’s Mobility & Materials (“M&M”) business has allowed Celanese to enhance its growth in high-value applications. Celanese expects incremental M&M synergies of at least $150 million during 2024.

The acquisitions of SO.F.TER., Nilit and Omni Plastics are also expected to contribute to earnings expansion in the company's Engineered Materials segment. The Elotex acquisition also strengthened the company’s position in the vinyl acetate ethylene emulsions space. Moreover, the purchase of Exxon Mobil's Santoprene business broadened the company’s portfolio of engineered solutions and enables it to offer a wider range of functionalized solutions to targeted growth areas, including future mobility, medical and sustainability.

Celanese has also successfully completed the startup of a new 1.3-million-ton Clear Lake acetic acid expansion unit and a new vinyl acetate ethylene unit in Nanjing. It expects the Clear Lake expansion to contribute to higher earnings performance in the second quarter and into the second half of 2024.

However, CE is exposed to headwinds from demand softness in some of its end markets. It witnessed weak demand in several end markets and destocking in 2023. Soft demand led to inventory reduction and deferral of orders by the company’s customers. Demand remains sluggish in industrial and consumer goods end markets. The company continues to see subdued demand in Europe. Demand conditions are yet to return to normal levels. Weaker demand recovery globally is likely to weigh on the company’s volumes in the near term.

The company is also being challenged by significant competition. Competitive pressure is hurting its prices. CE saw lower pricing on a year-over-year basis across its segments in the first quarter. The company expects the pricing pressure to continue due to the challenging competitive dynamics in the second quarter of 2024.

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Celanese Corporation Price and Consensus

 

Celanese Corporation Price and Consensus
Celanese Corporation Price and Consensus

Celanese Corporation price-consensus-chart | Celanese Corporation Quote

 

Stocks to Consider

Better-ranked stocks in the basic materials space include Carpenter Technology Corporation CRS, Axalta Coating Systems Ltd. AXTA and ATI Inc. ATI.

Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 15.1%. The company’s shares have soared roughly 87% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Axalta Coating Systems, carrying a Zacks Rank #1, has a projected earnings growth rate of 26.8% for the current year. In the past 60 days, the consensus estimate for AXTA's current-year earnings has been revised upward by 5.9%. The company’s shares have gained roughly 6% in the past year.

ATI currently carries a Zacks Rank #2 (Buy). ATI beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 8.3%. The company’s shares have rallied around 36% in the past year.

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Celanese Corporation (CE) : Free Stock Analysis Report

Axalta Coating Systems Ltd. (AXTA) : Free Stock Analysis Report

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