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Here's Why You Should Retain Celanese (CE) in Your Portfolio

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·4-min read
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Celanese Corporation CE is gaining from its productivity measures, investments in organic projects and strategic acquisitions amid certain headwinds including raw material cost inflation.

Shares of this leading chemical and specialty materials maker are down 12.1% over a year compared with the 19.7% decline of its industry.

Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

 

Zacks Investment Research
Zacks Investment Research


Image Source: Zacks Investment Research

 

What’s Going in CE’s Favor?

Celanese is benefiting from its cost and productivity actions, investments in high-return organic projects and synergies of acquisitions. The company is also gaining from higher demand in most of its end markets.

The company continues to actively pursue acquisitions, which are providing it opportunities for additional growth, investment and synergies. The acquisitions of SO.F.TER., Nilit and Omni Plastics are 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. The buyout is expected to contribute to volumes in the Acetyl Chain segment.

The purchase of Exxon Mobil's Santoprene business also broadens 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 expects the acquisition to be accretive to its 2022 adjusted earnings per share and free cash flow.

Celanese, in Feb 2022, also entered into an agreement with DuPont to acquire the majority of the latter’s Mobility & Materials segment for cash proceeds of $11 billion. Through this deal, Celanese will be able to enhance its growth in high-value applications. It expects to achieve run-rate synergies of around $450 million within the first four years following the completion of the deal. The buyout is expected to be immediately accretive to the company’s adjusted earnings per share.

Celanese also 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.

The company also continues to generate strong cash flows and is focused on boosting shareholders’ value. It returned $73 million to shareholders through dividend payouts during the first quarter of 2022.

A Few Concerns

The company faces headwinds from raw material cost inflation due to supply constraints as witnessed in the last reported quarter. It is witnessing sustained inflation across many key raw materials as well as supply chain costs. Tight availability is expected to keep raw material costs elevated over the near term. Higher input costs are expected to affect margins in the second quarter of 2022. Celanese also expects continued moderation in the Acetyl Chain pricing conditions.

The semiconductor shortage is also hurting automotive OEM production around the world. The chip crisis has been exacerbated by the Russia-Ukraine conflict. Weaker automotive production is likely to affect the company’s automotive order patterns over the near term.

 

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 worth considering in the basic materials space include Nutrien Ltd. NTR, Albemarle Corporation ALB and Cabot Corporation CBT.

Nutrien, sporting a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 175.4% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 31% upward over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 5.8%, on average. NTR has rallied roughly 34% in a year.

Albemarle has a projected earnings growth rate of 212.6% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 106% upward in the past 60 days.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 22.5%. ALB has rallied roughly 34% in a year. The company flaunts a Zacks Rank #1.

Cabot, currently carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 21.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 5.2% upward in the past 60 days.

Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 12% over a year.


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