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Celanese (CE) Up 15% in 6 Months: What's Driving the Stock?

Shares of Celanese CorporationCE have moved up around 15.1% in the past six months compared with the industry 's rise of roughly 0.1%.

Celanese, which sports a Zacks Rank #1 (Strong Buy), has a market cap of roughly $15.7 billion. Average volume of shares traded in the past three months was around 928.9K. The company has expected long-term earnings per share (EPS) growth rate of 10%.

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

Driving Factors

Better-than-expected second-quarter performance, upbeat outlook, strength in Engineered Materials (EM) and Acetyl Chain units along with strategic measures including acquisitions and operational cost savings have contributed to the rally in Celanese's shares.

In the second quarter, Celanese's earnings jumped 47% year over year to $2.52 per share and adjusted earnings surged 62% to $2.90. The figure also surpassed the Zacks Consensus Estimate of $2.40.

Sales from the EM unit jumped 22% year over year to $664 million. Income in the segment improved around 17% to $175 million. Growth in Asia and the Americas, better product mix, recent acquisitions and project commercialization contributed to the division's earnings. Notably, Celanese commercialized 733 projects in EM during the quarter, up 34% year over year. It is on track to deliver nearly 3,000 project wins in 2018.

The company also raised adjusted EPS guidance for 2018 to roughly $10.50-$10.75 factoring in strength across the EM and Acetyl Chain units. It expects the momentum in Acetyl Chain to continue into the third quarter.

Moreover, the project pipeline model also continues to advance in EM. The company also expects to deliver free cash flow of more than $1 billion in 2018.

Celanese is also focused on growth through acquisitions. The purchase of Italy-based SO.F.TER. Group strengthened Celanese's solutions capability and project pipeline. Moreover, the acquisition of Nilit's nylon compounding unit is in sync with Celanese's plans to become a leading nylon compound supplier. The buyout enables the company to extend global leadership position in the EM business as nylon continues to be adopted in automotive, consumer and industrial applications.

The recent buyout of Omni Plastics also reinforces Celanese's global asset base by adding compounding capacity in the Americas, which will allow the company to continue supporting a diverse and growing customer base.

The company's strategic initiatives including cost savings through productivity actions and efficiency enhancement are expected to continue to drive earnings. Its bottom line is expected to be driven by productivity actions, price hike actions and operational improvement. Celanese expects to achieve productivity savings of $40-$50 million by 2020.

Celanese Corporation Price and Consensus

Celanese Corporation Price and Consensus | Celanese Corporation Quote

Other Stocks to Consider

A few other top-ranked stocks in the basic materials space are Huntsman Corporation HUN , Ingevity Corporation NGVT and Trinseo S.A. TSE , each sporting a Zacks Rank #1. You can see the complete list of today's Zacks #1 Rank stocks here .

Huntsman has an expected long-term earnings growth rate of 8.5%. Its shares have returned 19.9% in a year.

Ingevity has an expected long-term earnings growth rate of 12%. Its shares have surged 62.6% in the past year.

Trinseo has an expected long-term earnings growth rate of 12%. Its shares have gained 20.2% in the past year.

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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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