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Here's Why You Should Add Celanese (CE) to Your Portfolio

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Celanese Corporation’s (CE - Free Report) shares have popped around 19% over the past three months. We are positive on the company’s prospects and believe that the time is right for you to add the stock to portfolio as it looks promising and is poised to carry the momentum ahead.

Celanese has a Zacks Rank #2 (Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 (Strong Buy) or 2, offer the best investment opportunities for investors.

Let’s take a look into the factors that make this leading chemical and specialty materials maker an intriguing choice for investors right now.

An Outperformer

Shares of Celanese have rallied 48% over the past six months against the 13.7% decline of its industry. It has also outperformed the S&P 500’s roughly 23% rise over the same period.

 

 

Estimates Going Up

Over the past two months, the Zacks Consensus Estimate for Celanese for the current year has increased around 3.4%. The consensus estimate for 2021 has also been revised 3.8% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.

Positive Earnings Surprise History

Celanese has outpaced the Zacks Consensus Estimate in three of the trailing four quarters. In this time frame, it has delivered an earnings surprise of 8.6%, on average.

Superior Return on Equity (ROE)

ROE is a measure of a company’s efficiency in utilizing shareholder’s funds. ROE for the trailing 12-months for Celanese is 31.4%, above the industry’s level of 10.3%.

Valuation Looks Attractive

Celanese’s shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.

Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Celanese is currently trading at trailing 12-month EV/EBITDA multiple of 15.41, cheaper compared with the industry average of 30.33.

Growth Drivers in Place

Celanese is expected to benefit from its productivity measures, investments in high-return organic projects and strategic acquisitions. The company is also seeing a recovery in demand across most of its end markets.

The company remains committed to execute its productivity programs that include the implementation of a number of cost reduction capital projects. It expects to achieve gross savings of $200 million from its productivity actions in 2020. Celanese has already attained $166 million of this productivity target.

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

 

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Bunge Limited (BG - Free Report) , Impala Platinum Holdings Limited (IMPUY - Free Report) and BHP Group (BHP - Free Report) .

Bunge has an expected earnings growth rate of 43.5% for the current year. The company’s shares have gained around 12% in the past year. It currently carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum has an expected earnings growth rate of 131.7% for the current fiscal. The company’s shares have rallied around 31% in the past year. It currently carries a Zacks Rank #1.

BHP Group has a projected earnings growth rate of 19.3% for the current fiscal year. The company’s shares have gained around 19% in a year. It currently carries a Zacks Rank #1.

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