Celanese (CE) Up 5.8% Since Last Earnings Report: Can It Continue?

A month has gone by since the last earnings report for Celanese (CE). Shares have added about 5.8% in that time frame, underperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or is Celanese due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Celanese's Earnings and Sales Surpass Estimates in Q2

Celanese logged earnings from continuing operations of 93 cents per share in second-quarter 2020, down from $1.67 in the year-ago quarter.

Barring one-time items, adjusted earnings were $1.30 per share, down from $2.38 in the year-ago quarter. However, the figure surpassed the Zacks Consensus Estimate of $1.09.

Revenues of $1,193 million fell 25.1% year over year, but beat the Zacks Consensus Estimate of $1,073.8 million.

Segment Review

Net sales in the Engineered Materials unit were $420 million in the quarter, down 29.2% year over year. The segment witnessed lower volumes due to global automotive demand decline along with and considerably weaker demand across industrial applications and consumer appliances stemming from the coronavirus outbreak.

The Acetyl Chain segment posted net sales of $662 million, down 23.5% year over year. Sales were affected by a sustained decline in industry pricing due to deflationary environment for raw materials, including sharp declines in ethylene and methanol.

Net sales in the Acetate Tow segment were $127 million, down 22.6% year over year.

Financials

Celanese ended the quarter with cash and cash equivalents of $539 million, up 4.1% year over year. Long-term debt fell 13.2% year over year to $2,989 million.

Celanese generated operating cash flow of $379 million and free cash flow of $283 million in the quarter. Capital expenditures amounted to $88 million for the quarter.

Outlook

Celanese stated that it witnessed demand recovery in the early third quarter order bookings at improved levels on a sequential-comparison basis. The company expects a modest sequential improvement in earnings in the Engineered Materials unit for the third quarter. It also sees a modest volume recovery in the Acetyl Chain, which is expected to offset incremental energy and turnaround costs. The company also noted that surge in coronavirus cases is a concern. Celanese is focused on productivity and working capital management.
 

How Have Estimates Been Moving Since Then?

It turns out, estimates review have trended upward during the past month. The consensus estimate has shifted 7.33% due to these changes.

VGM Scores

At this time, Celanese has a nice Growth Score of B, though it is lagging a bit on the Momentum Score front with a C. Charting a somewhat similar path, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of B. If you aren't focused on one strategy, this score is the one you should be interested in.

Outlook

Estimates have been broadly trending upward for the stock, and the magnitude of these revisions looks promising. Notably, Celanese has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.

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