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Celanese (CE) Tops Q1 Earnings Estimates, Lifts FY18 View

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Celanese Corporation (CE - Free Report) logged earnings from continuing operations of $2.68 per share for the first quarter of 2018, a roughly two-fold increase from $1.30 per share a year ago.

Earnings, barring one-time items, were $2.79 per share, a 54% surge from $1.81 per share posted a year ago. It topped the Zacks Consensus Estimate of $2.36.
 
Revenues of $1,851 million were up roughly 26% year over year, also outpacing the Zacks Consensus Estimate of $1,696 million.

The chemical maker benefited from gains across its Engineered Materials (EM) and Acetyl Chain units in the quarter. Improving industry fundamentals and the strength of the company’s commercial models also supported the results.

Celanese Corporation Price, Consensus and EPS Surprise

 

Celanese Corporation Price, Consensus and EPS Surprise | Celanese Corporation Quote

Segment Review

Sales from the EM unit jumped 29% year over year to a record $665 million in the quarter. Segment income went up around 21% year over year to $182 million. Growth in Asia, recent acquisitions and pipeline commercialization contributed to the division’s earnings. The company commercialized a record 742 projects in EM during the quarter, up 45% year over year, and is on track to deliver roughly 3,000 project wins in 2018.

Celanese saw lower volume and pricing in the quarter in its Acetate Tow segment. Segment income was $78 million, down roughly 16% year over year.

The Acetyl Chain segment saw net sales of more than $1 billion in the quarter, up around 32% year over year. Segment income was $253 million, a more than two-fold year over year rise. The division gained from improving industry fundamentals as well as higher volumes and pricing in the quarter. Improving global supply and demand dynamics in the industry contributed to profitability.

Financials

Celanese ended the quarter with cash and cash equivalents of $490 million, down around 2% year over year. Long-term debt was up 17% year over year to $3,343 million.

Celanese generated operating cash flow of $143 million and free cash flow of $55 million. Capital expenditure for the quarter was $86 million. Moreover, the company returned $63 million to shareholders through dividends in the quarter.

Outlook

Celanese raised its earnings guidance for 2018 based on strength across its Acetyl Chain and EM units. The company now envisions its adjusted earnings per share to grow in the 20-25% range year over year in 2018, up from its earlier view of 12-16% growth.

Celanese, in February, wrapped up its acquisition of Omni Plastics L.L.C. and its subsidiaries, including the distributor Resinal de Mexico. Omni Plastics specializes in custom compounding of various engineered thermoplastic materials, which is a material of choice in various markets including electrical and electronics, automotive, industrial and consumer goods.

The buyout reinforces Celanese’s global asset base by adding compounding capacity in the Americas, which will allow the company to continue supporting a diverse and growing customer base.

Price Performance

Celanese has outperformed the industry in a year’s time. While shares of the company have rallied around 19.4%, the industry gained roughly 11.8% over the same period.

 



 

Zacks Rank & Stocks to Consider
 
Celanese carries a Zacks Rank #2 (Buy).

Better-ranked companies in the basic materials space include Kronos Worldwide, Inc. (KRO - Free Report) , Methanex Corporation (MEOH - Free Report) and Eastman Chemical Company (EMN - Free Report) .

Kronos sports a Zacks Rank #1 (Strong Buy) and has an expected long-term earnings growth rate of 5%. Its shares have rallied roughly 54% over a year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Methanex carries a Zacks Rank #1 and has an expected long-term earnings growth rate of 15%. Its shares have gained around 43% over a year.

Eastman Chemical has an expected long-term earnings growth rate of 8.9% and carries a Zacks Rank #2. Its shares have gained around 37% over a year.

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