Celanese Corporation ( CE Quick Quote CE - Free Report) is benefiting from productivity measures, investments in organic projects and strategic acquisitions. However, it is encountering headwinds like raw material cost inflation and impacts from the ongoing semiconductor shortage.
Shares of this leading chemical and specialty materials maker are up 54.5% in the past year compared with 21.3% rise of the
industry. Image Source: Zacks Investment Research
Celanese, a Zacks Rank #3 (Hold) stock, is benefiting from its productivity actions, investments in high-return organic projects and synergies of acquisitions. The company is also gaining from improving demand in most of its end markets.
The company continues to focus on executing productivity programs that include the implementation of a number of cost-reduction capital projects. It achieved gross savings of $214 million from its productivity actions in 2020. Productivity actions are also expected to support margins in 2021.
Celanese continues to actively pursue acquisitions, which are providing it opportunities for additional growth, investments 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. The recently-announced purchase of Exxon Mobil's Santoprene Business will broaden the company’s portfolio of engineered solutions.
The company continues to generate strong cash flows and is focused on boosting shareholders’ value. It returned $326 million to shareholders through dividend payouts and share repurchases during second-quarter 2021.It completed $500 million in share buybacks in first-half 2021 and expects to repurchase another $500 million in the second half.
However, the company faces headwinds from elevated raw material costs partly due to supply constraints witnessed in the last reported quarter. It is likely to face persistent inflation across many key raw materials as well as supply chain costs in third-quarter 2021.
Tight availability of resins, including nylon and glass fiber is expected to hike raw material costs in the third quarter. As such, higher input costs are expected to hurt margins.
The semiconductor shortage is also making a negative impact on automotive OEM production around the world. Weaker automotive production is likely to affect the company’s automotive order patterns.
Stocks to Consider
Some better-ranked stocks in the basic materials space are
Nucor Corporation ( NUE Quick Quote NUE - Free Report) , Dow Inc. ( DOW Quick Quote DOW - Free Report) and Cabot Corporation ( CBT Quick Quote CBT - Free Report) .
Nucor has a projected earnings growth rate of around 494% for the current year. The company’s shares have soared 163.4% 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.
Dow has an expected earnings growth rate of around 403.01% for the current year. The company’s shares have gained 38.4% in the past year. It currently holds a Zacks Rank #2 (Buy).
Cabot has an expected earnings growth rate of around 138.5% for the current fiscal. The company’s shares have rallied 43.1% in the past year. It currently carries a Zacks Rank #2.