Celanese Downgraded to Neutral - Analyst Blog


We downgrade our recommendation on leading chemical maker Celanese Corporation ( CE ) to Neutral following its mixed fourth-quarter 2011 results. Its adjusted earnings 58 cents a share missed the Zacks Consensus Estimate by 5 cents.

Sales rose 7% year over year to $1.61 billion, narrowly beating the Zacks Consensus Estimate. Revenue growth was driven by higher pricing across the board. The company saw higher sales across its business segments in the quarter. However, its core Acetyl Intermediates business was affected by lower demand in the European low-end markets.

Celanese is one of the world's largest producers of acetyl products as well as the leading global producer of high-performance engineered polymers. It competes with BASF SE ( BASFY ) and E. I. Du Pont de Nemours & Co. ( DD ), among others.

Celanese remains optimistic that leading technologies, low cost operations and a strong presence in emerging economies will enable it to deliver incremental earnings in 2012.

The company continues to accelerate growth in the emerging markets, including Asia. Its expansion initiatives in China are expected to support earnings growth. The company's integrated chemical complex in Nanjing, China, serves as a base for expansion in Asia, supporting the region's increasing demand.

Celanese recently received all government approvals necessary to modify its existing integrated acetyl facility at the Nanjing Chemical Industrial Park. The facility, which is scheduled to go live in mid-2013, is expected to boost ethanol production for industrial uses in China.

However, Celanese is exposed to volatile raw material (natural gas, ethylene and methanol) prices used in the production of basic chemicals in the Acetyl Intermediates segment, principally formaldehyde, acetic acid and vinyl acetate monomer.

Moreover, the company's balance sheet leverage is also relatively high, limiting its financial flexibility. Celanese also remains challenged by a soft economic environment in Europe. Our recommendation on the stock is backed by a short-term Zacks #3 Rank (Hold).

BASF SE ( BASFY ): Free Stock Analysis Report
CELANESE CP-A ( CE ): Free Stock Analysis Report

DU PONT ( EI ) DE ( DD ): Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.

This article appears in: Investing , Business , Stocks

Referenced Stocks: BASFY , CE , DD , EI



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