Celanese Corporation (CE - Free Report) recorded earnings from continuing operations of 73 cents per share in the fourth quarter of 2018, down around 51.3% from $1.50 in the year-ago quarter.
Barring one-time items, adjusted earnings were $2.38 a share, up 20.2% from $1.98 in the year-ago quarter. The figure, however, trailed the Zacks Consensus Estimate of $2.42.
Revenues of $1,689 million rose roughly 6% year over year but lagged the Zacks Consensus Estimate of $1,730.4 million.
Adjusted earnings rose 46.5% year over year to $11 per share for 2018. Net sales increased 16.5% year over year to $7,155 million.
The chemical maker’s financial performance was driven by strong contributions from the Acetyl Chain and Engineered Materials units.
Net sales in the Engineered Materials unit went up 7.2% year over year to $622 million in the quarter. Segment income went down around 3.1% year over year to $95 million. The company commercialized 866 projects during the quarter, up 48% year over year. Going forward, Celanese expects margins to recover from fourth-quarter levels, courtesy of lower raw material costs and more normalized regional sales mix.
Net sales in Acetate Tow segment rose 2.5% year over year to $161 million, while income declined 53.7% to $19 million. Lower income was mainly due to the impact of higher acetyls raw material costs along with an inventory build in fourth-quarter 2017.
The Acetyl Chain segment posted net sales of $936 million in the quarter, up around 5% year over year. The results benefited from price increase actions. Segment income was $211 million, up around 21% year over year. Integrated product chain along with a global supply network positioned the segment to expand pricing in excess of raw material increases.
Celanese ended the quarter with cash and cash equivalents of $439 million, down around 23.8% year over year. Long-term debt was down 10.4% year over year to $2,970 million.
Celanese generated operating cash flow of $1.6 billion and free cash flow of $1.2 billion for 2018. Capital expenditure totaled $337 million for the year. Moreover, the company returned $1.1 billion to shareholders through dividends and share repurchases.
Celanese projects adjusted earnings per share (EPS) for 2019 to be roughly $10.50, considering a slower start and expected moderation during the fourth quarter of 2019.
Overall, the company’s underlying fundamentals and expected demand for products and solutions-based businesses are strong. Celanese is also optimistic to earn $12 per share in 2020 on the back of strength of business models, contributions from planned acquisition and organic investment projects.
Celanese’ shares have lost 12.1% in the past year compared with the industry’s decline of 6.4%.
Zacks Rank & Key Picks
Celanese currently carries a Zacks Rank #4 (Sell).
A few better-ranked stocks in the basic materials space include Ingevity Corporation (NGVT - Free Report) , Quaker Chemical Corporation (KWR - Free Report) and Israel Chemicals Ltd. (ICL - Free Report) . While Ingevity sports a Zacks Rank #1 (Strong Buy), Quaker Chemical and Israel Chemicals carry a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Ingevity has an expected earnings growth rate of 21.5% for 2019. The company’s shares have gained 22.7% in the past year.
Quaker Chemical has an expected earnings growth rate of 21.1% for 2019. Its shares have moved up 27.3% in a year’s time.
Israel Chemicals has an expected earnings growth rate of 5.4% for 2019. Its shares have rallied 33.8% in a year’s time.
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