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Celanese Outlook Encouraging
Celanese Corp.-A (CE - Analyst Report) has a strong growth strategy with development in Asia as a key factor. There is $400 million of free cash flow per year primarily focused on share repurchase. Higher pricing on continued strong global demand for acetyl intermediates products, positive currency impacts, growth in Asia supported by the company’s new acetic acid unit in Nanjing, China, as well as sales of industrial specialties from the acquired Acetate Products Limited are driving the company’s sales.
On April 21, 2008, Celanese reported first quarter 2008 results. Diluted EPS from continuing operations was $1.06, versus $0.77 last year. Sales increased 19% year-over-year to $1.85 billion. Net earnings, however, decreased to $145 million from $201 million in the year-ago period. Net sales in the acetyl intermediates and downstream business increased 31%, driven by higher volumes and prices.
The company raised its 2008 outlook for adjusted EPS to $3.60 - $3.85 from the previous guidance of $3.40 - $3.70 on the back of higher demand and prices. Operating EBITDA is expected to be within $1,355 million to $1,415 million. The company expects adjusted tax rate of 26% in 2008.
By 2010, the company expects an EPS of $5. In addition, the company has leadership positions in oligopolistic markets that have solid fundamentals. As a result, we rate the shares a Buy with a target of $50. This price target is 13.1x our 2008 estimate. Currently, Celanese is valued at 11.8x our 2008 estimate of $3.83.
Read the full analyst report on CE.
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