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Celanese (CE) Up 34% in 6 Months: What's Behind the Rally?

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Shares of Celanese Corporation (CE - Free Report) have popped 33.7% over the past six months. The company has also outperformed its industry’s rise of 13.8% over the same time frame.

Celanese, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $12.6 billion and average volume of shares traded in the last three months is around 859.8K.

 


 

 

Let’s delve deeper into the factors behind the stock’s price appreciation.

What’s Aiding the Stock?

Celanese is gaining from its productivity actions, investments in high-return organic projects and strategic acquisitions. Forecast-topping earnings performance in the second quarter has also contributed to the gain in the company's shares. Its adjusted earnings of $1.30 per share for the second quarter topped the Zacks Consensus Estimate of $1.09.

Although Celanese saw demand weakness across automotive, industrial applications and consumer appliances stemming from the coronavirus pandemic, it benefited from its productivity, pricing and operational improvement actions in the second quarter. The company, in its second-quarter call, also stated that it witnessed demand recovery in the early third quarter order bookings at improved levels on a sequential-comparison basis.

Celanese remains focused on executing its productivity programs that include the implementation of a number of cost reduction capital projects. The company expects to achieve gross savings of $200 million from its productivity actions in 2020. Notably, Celanese has already achieved $135 million of this productivity target.

Celanese also expects to generate one-time cost savings of $30-$40 million this year through reductions in travel, manufacturing costs and other corporate function expense. Productivity actions are expected to lend support to its margins in 2020.

Moreover, Celanese continues to actively pursue acquisitions, which are providing it opportunities for additional growth, investment and synergies. The acquisitions of SO.F.TER., Nilit and Omni Plastics are expected to contribute to earnings expansion in the company's Engineered Materials segment.

The acquisition of Elotex has also strengthened the company’s position in the vinyl acetate ethylene emulsions space. The acquisition is expected to contribute to volumes in the company's Acetyl Chain segment this year.

 

Stocks to Consider

Better-ranked stocks worth considering in the basic materials space include AngloGold Ashanti Limited (AU - Free Report) , Barrick Gold Corporation (GOLD - Free Report) and Kinross Gold Corporation (KGC - Free Report) .

AngloGold Ashanti has a projected earnings growth rate of 124.2% for the current year. The company’s shares have gained roughly 43% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold has a projected earnings growth rate of 80.4% for the current year. The company’s shares have rallied around 46% in a year. It currently has a Zacks Rank #1.

Kinross Gold has an expected earnings growth rate of 100% for the current year. The company’s shares have shot up around 79% in the past year. It currently carries a Zacks Rank #2 (Buy).

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