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Here's Why You Should Hold Onto Celanese (CE) Stock for Now
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Celanese Corporation (CE - Free Report) is gaining from its productivity measures, investments in organic projects and strategic acquisitions amid certain headwinds including raw material cost inflation.
Shares of this leading chemical and specialty materials maker are up 11.8% year to date compared with the 0.6% rise of its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Image Source: Zacks Investment Research
What’s Going in CE’s Favor?
Celanese 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 also remains focused on executing its 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 to its margins in 2021.
Celanese also 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. The recently-announced purchase of Exxon Mobil's Santoprene Business will broaden the company’s portfolio of engineered solutions.
The company also 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.
A Few Concerns
The company faces headwinds from elevated raw material costs due to supply constraints as witnessed in the last reported quarter. It is expected to face sustained 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. Celanese also expects continued moderation in the Acetyl Chain industry pricing.
The semiconductor shortage is also hurting automotive OEM production around the world. Weaker automotive production is likely to affect the company’s automotive order patterns in the third quarter.
Image: Bigstock
Here's Why You Should Hold Onto Celanese (CE) Stock for Now
Celanese Corporation (CE - Free Report) is gaining from its productivity measures, investments in organic projects and strategic acquisitions amid certain headwinds including raw material cost inflation.
Shares of this leading chemical and specialty materials maker are up 11.8% year to date compared with the 0.6% rise of its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Image Source: Zacks Investment Research
What’s Going in CE’s Favor?
Celanese 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 also remains focused on executing its 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 to its margins in 2021.
Celanese also 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. The recently-announced purchase of Exxon Mobil's Santoprene Business will broaden the company’s portfolio of engineered solutions.
The company also 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.
A Few Concerns
The company faces headwinds from elevated raw material costs due to supply constraints as witnessed in the last reported quarter. It is expected to face sustained 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. Celanese also expects continued moderation in the Acetyl Chain industry pricing.
The semiconductor shortage is also hurting automotive OEM production around the world. Weaker automotive production is likely to affect the company’s automotive order patterns in the third quarter.
Celanese Corporation Price and Consensus
Celanese Corporation price-consensus-chart | Celanese Corporation Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include The Mosaic Company (MOS - Free Report) , United States Steel Corporation (X - Free Report) and Olympic Steel, Inc. (ZEUS - Free Report) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Mosaic has an expected earnings growth rate of 471.8% for the current year. The stock has also rallied around 78% over a year.
U.S. Steel has a projected earnings growth rate of 368.9% for the current year. The company’s shares have shot up around 193% in a year.
Olympic Steel has an expected earnings growth rate of 2,362.2% for the current year. The company’s shares have rallied around 90% in the past year.