Celanese Corporation (CE - Free Report) reported second-quarter 2023 earnings from continuing operations of $2 per share, which declined from $4.03 in the prior-year quarter.
Adjusted earnings in the second quarter were $2.17 per share, down 56.5% from $4.99 reported a year ago. The bottom line lagged the Zacks Consensus Estimate of $2.46.
Revenues of $2,795 million increased roughly 12.4% year over year. However, revenues missed the Zacks Consensus Estimate of $2,838.4 million.
Celanese’s second-quarter results were impacted by a drop in Acetyl Chain net sales due to slow demand recovery. Strategic initiatives, like boosting volume during industry turnarounds and emphasizing higher-margin downstream derivatives, led to improved margins and sequential earnings growth. In the Engineered Materials segment, market challenges and intense competition led to actions such as production cuts and sales focus shifts. Despite reduced sales, the segment achieved profitability through cost control and synergies.
Segment Highlights
Net sales in the Engineered Materials unit were $1,585 million in the reported quarter, up around 67% year over year. It beat our estimate of $1,222.9 million. The segment reported an operating profit of $158 million and an adjusted EBIT of $205 million in the second quarter.
The Acetyl Chain segment posted net sales of $1,233 million, down roughly 20.9% year over year. It lagged our estimate of $1,262.1 million. The segment generated an operating profit of $295 million and an adjusted EBIT of $332 million in the second quarter.
Financials
Celanese ended the quarter with cash and cash equivalents of $1,296 million, up roughly 11% sequentially. Long-term debt was down around 3.8% to $12,889 million.
Cash provided by operating activities was $762 million and free cash flow was $611 million in the reported quarter. Capital expenditures were $145 million in the quarter.
Outlook
Celanese sees adjusted earnings in the range of $2-$2.50 per share for the third quarter of 2023. The projection includes the expected roughly 30 cents impact from the M&M amortization. Moreover, for the full year, Celanese anticipates adjusted earnings in the range of $9-$10, which includes approximately $1.20 per share of M&M transaction amortization.
Recognizing the volatility and unpredictability of the current market landscape and competitive environment, the company is proactively implementing strategic initiatives. These actions involve strengthening its commercial teams, aligning production and inventory levels with prevailing demand, implementing cost-saving measures, and optimizing cash flow. These endeavors are anticipated to result in robust cash generation throughout 2023 and a continuation of earnings growth during the second half of the year.
Price Performance
Celanese’s shares have gained 12.4% in the past year compared with 7.3% rise of the industry.
Zacks Rank & Key Picks
Celanese currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the Basic Materials space include Carpenter Technology Corporation (CRS - Free Report) and PPG Industries, Inc. (PPG - Free Report) , both sporting a Zacks Rank #1 (Strong Buy), and ATI Inc. (ATI - Free Report) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The earnings estimate for CRS’s current year is pegged at $3.36, indicating year-over-year growth of 194%. CRS beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 10%. The company’s shares have rallied 79% in the past year.
The Zacks Consensus Estimate for PPG’s current-year earnings has been revised 3.5% upward in the past 60 days. PPG beat the Zacks Consensus Estimate in three of the last four quarters and missed in one. It delivered a trailing four-quarter earnings surprise of 7.3% on average. The company’s shares have risen roughly 11.7% in the past year.
The earnings estimate for ATI’s current year is pegged at $2.25, indicating year-over-year growth of 13%. ATI beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 3.4%. The company’s shares have rallied 54% in the past year.
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Celanese Corporation (CE - Free Report) reported second-quarter 2023 earnings from continuing operations of $2 per share, which declined from $4.03 in the prior-year quarter.
Adjusted earnings in the second quarter were $2.17 per share, down 56.5% from $4.99 reported a year ago. The bottom line lagged the Zacks Consensus Estimate of $2.46.
Revenues of $2,795 million increased roughly 12.4% year over year. However, revenues missed the Zacks Consensus Estimate of $2,838.4 million.
Celanese’s second-quarter results were impacted by a drop in Acetyl Chain net sales due to slow demand recovery. Strategic initiatives, like boosting volume during industry turnarounds and emphasizing higher-margin downstream derivatives, led to improved margins and sequential earnings growth. In the Engineered Materials segment, market challenges and intense competition led to actions such as production cuts and sales focus shifts. Despite reduced sales, the segment achieved profitability through cost control and synergies.
Segment Highlights
Net sales in the Engineered Materials unit were $1,585 million in the reported quarter, up around 67% year over year. It beat our estimate of $1,222.9 million. The segment reported an operating profit of $158 million and an adjusted EBIT of $205 million in the second quarter.
The Acetyl Chain segment posted net sales of $1,233 million, down roughly 20.9% year over year. It lagged our estimate of $1,262.1 million. The segment generated an operating profit of $295 million and an adjusted EBIT of $332 million in the second quarter.
Financials
Celanese ended the quarter with cash and cash equivalents of $1,296 million, up roughly 11% sequentially. Long-term debt was down around 3.8% to $12,889 million.
Cash provided by operating activities was $762 million and free cash flow was $611 million in the reported quarter. Capital expenditures were $145 million in the quarter.
Outlook
Celanese sees adjusted earnings in the range of $2-$2.50 per share for the third quarter of 2023. The projection includes the expected roughly 30 cents impact from the M&M amortization. Moreover, for the full year, Celanese anticipates adjusted earnings in the range of $9-$10, which includes approximately $1.20 per share of M&M transaction amortization.
Recognizing the volatility and unpredictability of the current market landscape and competitive environment, the company is proactively implementing strategic initiatives. These actions involve strengthening its commercial teams, aligning production and inventory levels with prevailing demand, implementing cost-saving measures, and optimizing cash flow. These endeavors are anticipated to result in robust cash generation throughout 2023 and a continuation of earnings growth during the second half of the year.
Price Performance
Celanese’s shares have gained 12.4% in the past year compared with 7.3% rise of the industry.
Zacks Rank & Key Picks
Celanese currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks in the Basic Materials space include Carpenter Technology Corporation (CRS - Free Report) and PPG Industries, Inc. (PPG - Free Report) , both sporting a Zacks Rank #1 (Strong Buy), and ATI Inc. (ATI - Free Report) carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The earnings estimate for CRS’s current year is pegged at $3.36, indicating year-over-year growth of 194%. CRS beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 10%. The company’s shares have rallied 79% in the past year.
The Zacks Consensus Estimate for PPG’s current-year earnings has been revised 3.5% upward in the past 60 days. PPG beat the Zacks Consensus Estimate in three of the last four quarters and missed in one. It delivered a trailing four-quarter earnings surprise of 7.3% on average. The company’s shares have risen roughly 11.7% in the past year.
The earnings estimate for ATI’s current year is pegged at $2.25, indicating year-over-year growth of 13%. ATI beat the Zacks Consensus Estimate in all the last four quarters, with the average earnings surprise being 3.4%. The company’s shares have rallied 54% in the past year.
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Zacks targets 5 well-established companies with solid fundamentals and a history of raising dividends. More importantly, they have the resources and will to likely pay them in the future.
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