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Celanese (CE) Shares Up 36% YTD: What's Driving the Stock?

Shares of Celanese CorporationCE have popped around 36% year to date. The company has also outperformed its industry 's gain of 26% to over the same time frame.

Celanese, a Zacks Rank #2 (Buy) stock, has a market cap of roughly $14.5 billion. Average volume of shares traded in the last three months is around 710.9k. The company has expected long-term earnings per share growth rate of 9%.

Let's take a look into the factors that are driving this chemical maker's stock.

Driving Factors

Forecast-topping earnings performance in the first three quarters of 2017 and an upbeat outlook for the full year have contributed to a rally in Celanese's shares. The company delivered positive earnings surprise of 5.9%, 2.9% and 0.5% in the first, second and third quarter of 2017, respectively.

Celanese, in October, said that it remains optimistic that it can grow its adjusted earnings per share for 2017 toward the top end of its earlier announced guidance range of 9-11%. It also sees continued improvements in its acetyl's chain and materials businesses.

Celanese's strategic initiatives, including operational cost savings through productivity actions and efficiency enhancement, are driving its earnings.

Celanese is also well placed to gain from acquisitions and its acetate tow joint venture (JV) with Blackstone. The purchase of Italy-based SO.F.TER. Group has strengthened Celanese's solutions capability and project pipeline. SO.F.TER. Group's modern manufacturing facilities and product portfolio will also offer opportunities for additional growth, investment and synergies. The acquisition of Nilit's nylon compounding unit is also in sync with Celanese's plans to become a leading, global nylon compound supplier.

Moreover, in June 2017, Celanese and funds managed by Blackstone entered into an agreement to form a JV that will create a global acetate tow supplier, where the former will own 70% of the JV and Blackstone the remaining 30%.

The JV will have an expanded global production footprint including eight fully-owned manufacturing plants and three existing JV sites. The new company will be well placed to more efficiently address customers' needs and offer the best of quality and services.

Celanese also remains committed to expand capacity. The company, last month, said that it plans to expand the capacity of certain product-specific manufacturing production sites and global compounding assets to augment growth in its engineered materials business. Celanese will be adding production lines in China, the United States and Italy that are expected to raise compounding capacity by around 100 kilo tons per year.

Moreover, Celanese continues to generate strong cash flows and remains focused on returning value to shareholders. The company generated operating cash flow of $255 million and free cash flow of $181 million in third-quarter 2017. During the quarter, the company also returned $262 million to shareholders, including $62 million of dividends. Celanese has also repurchased shares worth $500 million this year.

Celanese Corporation Price and Consensus

Celanese Corporation Price and Consensus | Celanese Corporation Quote

Other Stocks to Consider

Other top-ranked companies in the basic materials space include Ingevity Corporation NGVT , Kraton Corporation KRA and Kronos Worldwide, Inc. KRO , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today's Zacks #1 Rank stocks here .

Ingevity has an expected long-term earnings growth of 12%. The stock has gained around 39% year to date.

Kraton has an expected earnings growth of 25.4% for the current year. Its shares are up roughly 71% year to date.

Kronos has an expected long-term earnings growth of 5%. Its shares are up roughly 143% year to date.

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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 Nasdaq, Inc.


The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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