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Is a Beat in the Cards for Celanese (CE) in Q3 Earnings?

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Celanese Corporation (CE - Free Report) is slated to release third-quarter 2018 results, after markets close on Oct 18.

The chemical company logged earnings from continuing operations of $2.52 per share in the second quarter of 2018, showing roughly 47% increase from $1.72 a year ago.

Adjusted earnings of $2.90 a share surpassed the Zacks Consensus Estimate of $2.40, translating into a positive earnings surprise of 20.8%.

Revenues rose 22% year over year to $1,844 million in the quarter, beating the Zacks Consensus Estimate of $1,789 million.

The company topped earnings estimates in the trailing four quarters, the average positive surprise being 11.5%.

Shares of Celanese have lost 7.9% in a year compared with the industry’s decline of 5.1%.


Can the company surprise investors again or is it heading for a possible pullback? Let’s see how things are shaping up for this announcement.


Earnings Whispers

Our proven model shows that Celanese is likely to beat the Zacks Consensus Estimate this earnings season.
Earnings ESP: Earnings ESP for Celanese’s third quarter is +0.62%. This is because the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at $2.76 and $2.75, respectively. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Celanese currently carries a Zacks Rank #2 (Buy), which when combined with a positive ESP, makes us confident of an earnings beat. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Factors at Play

Celanese, in its second-quarter call, raised its adjusted earnings per share guidance for 2018 to roughly $10.50-$10.75 factoring in strength across its Engineered Materials (EM) and Acetyl Chain units. The company expects the momentum in Acetyl Chain to continue into the third quarter. In the second quarter, the division gained from improving acetyl industry fundamentals as well as higher volumes and pricing.

The company’s strategic measures including cost savings through productivity actions, price hike initiatives and efficiency enhancement are expected to continue to drive earnings in the to-be-reported quarter.

The Zacks Consensus Estimate for third-quarter revenues for Celanese is pegged at $1,817 million, reflecting an increase of 16.1% from the year-ago quarter.

Net sales at the EM segment are projected to rise 25.7% year over year as the Zacks Consensus Estimate for the third quarter is pegged at $630 million. Sales and income from the EM units jumped year over year in the second quarter supported by growth in Asia and the Americas, better product mix, recent acquisitions and project commercialization. Celanese is on track to deliver nearly 3,000 project wins in 2018.

Celanese is focused on growth through acquisitions. The buyout of Omni Plastics L.L.C. 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. Moreover, the acquisition of Nilit's nylon compounding unit is in sync with Celanese’s plans to become a leading nylon compound supplier. The buyout enables the company to fortify its global leadership position in the EM business as nylon continues to be adopted in automotive, consumer and industrial applications.

However, Celanese is witnessing lower volume and pricing in its Acetate Tow segment. Subdued utilization rates across the tow industry are affecting the prices of acetate tow. Challenges in this unit are expected to persist in the third quarter. Celanese expects Acetate Tow earnings to remain relatively flat year over year in 2018. The company is also exposed to headwinds from raw material cost inflation.

Celanese Corporation Price and EPS Surprise



Other Stocks Poised to Beat Estimates

Here are some other companies in the basic materials space you may want to consider as our model shows that they too have the right combination of elements to post an earnings beat this quarter:

Albemarle Corporation (ALB - Free Report) has an Earnings ESP of +3.75% and carries a Zacks Rank #1.
FMC Corporation (FMC - Free Report) has an Earnings ESP of +3.64% and carries a Zacks Rank #2.

Ingevity Corporation (NGVT - Free Report) has an Earnings ESP of +6.95% and carries a Zacks Rank #3 (Hold).
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