We are reaffirming our Neutral recommendation on
) following its mixed second-quarter 2012 results.
Adjusted earnings of $1.47 per share topped the Zacks Consensus
Estimate of $1.40. But sales fell 4% year over year to $1,675
million, missing the Zacks Consensus Estimate.
Revenues were hit by a soft European economy, sluggish growth in
Asia and weak pricing in the acetyl intermediates business.
Celanese expects the challenging economic conditions to continue
in Europe for the remainder of 2012, while growth rates in Asia
will be steady. The company sees adjusted earnings per share in the
second half to be modestly below the first half of 2012.
Celanese is among the world's largest producers of acetyl products
as well as the leading global producer of high-performance
engineered polymers. It competes with
E. I. Du Pont de Nemours & Co.
Celanese plans to cut costs and run its plants better to counter
weak demand. The company's strong presence in emerging markets will
enable it to deliver incremental earnings in 2012. Moreover, the
company continues to generate strong cash flows and remains focused
on returning value to its shareholders.
Celanese 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 entered into an agreement with Pertamina, the
state-owned energy company of Indonesia, for the development of
fuel ethanol projects. Under the alliance, the company will work
with Pertamina to meet Indonesia's growing need for liquid
transportation fuel for the development of new energy sources.
However, Celanese is witnessing weak acetyl demand in China and
Europe. The company is also seeing softness in some of the advanced
interim market segments due to weak automobile builds in Europe.
Moreover, Celanese is exposed to volatility in raw material costs,
currency headwinds and intense competition. The company's balance
sheet leverage is also relatively high, limiting its financial
Our recommendation on the stock is supported 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
METHANEX CORP (MEOH): Free Stock Analysis
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