On Sep 12, we reaffirmed our Neutral recommendation on
chemical and advanced materials maker
). While we are encouraged by the company's strategic actions to
drive earnings, we remain concerned about weak demand for acetyl
Both revenues and adjusted earnings for second-quarter 2013,
reported on Jul 18, missed Zacks Consensus Estimates. Celanese
expects challenging economic conditions to continue through 2013,
but expects earnings to rise on the back of company-specific
Celanese, a Zacks Rank #3 (Hold) stock, is witnessing weak
demand and pricing in its acetyl business. Weak global demand for
acetyl products led to a decline in prices in the Acetyl
Intermediates division in the second quarter. Challenging
economic conditions in Europe and sluggish growth in Asia may
impact the company's results moving ahead.
Moreover, Celanese is exposed to raw material supply issues
and cost pressures. The company's balance sheet leverage is also
relatively high, limiting its financial flexibility.
Nevertheless, Celanese's strong presence in emerging markets
will enable it to deliver incremental earnings in 2013. The
company has taken up cost-cutting measures and the necessary
steps to run its plants better to counter weak demand. Moreover,
Celanese continues to generate strong cash flows and remains
focused on returning value to its shareholders.
Celanese is aggressively expanding capacity in the emerging
Asian markets. Its expansion initiatives in China are expected to
support earnings growth. Celanese's integrated chemical complex
in Nanjing, China, serves as a base for expansion in Asia,
supporting the region's increasing demand.
Other Stocks to Consider
Other companies in the chemical space having favorable Zacks
Akzo Nobel NV
Eastman Chemical Co.
). All of them hold a Zacks Rank #2 (Buy).
AKZO NOBEL NV (AKZOY): Get Free Report
CELANESE CP-A (CE): Free Stock Analysis
EASTMAN CHEM CO (EMN): Free Stock Analysis
FERRO CORP (FOE): Free Stock Analysis Report
To read this article on Zacks.com click here.