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Celanese (CE) to Report Q2 Earnings: What's in the Offing?

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Celanese Corporation (CE - Free Report) is set to release second-quarter 2019 results after the bell on Jul 22. The leading chemical and specialty materials maker is expected to gain from its productivity and operational improvement actions as well as contributions of acquisitions. However, a sluggish demand environment will likely impact its results in the quarter.

The company beat the Zacks Consensus Estimate for earnings in three of the trailing four quarters while missed once. In this timeframe, it delivered an average positive surprise of around 8%.

Celanese’s shares have gained 20.1% over a year, modestly outperforming its industry’s 19.7% rise.


Let’s see how things are shaping up for this announcement.

What do the Estimates Say?

Celanese’s revenues for the second quarter are projected to decline 11.9% year over year, as the Zacks Consensus Estimate is currently pegged at $1,625 million.

Net sales in the company’s Engineered Materials (EM) division are projected to decline roughly 1.2% year over year as the Zacks Consensus Estimate for the same is currently pegged at $656 million for the second quarter.

Net sales in the Acetate Tow division is projected to fall 1.2% as the Zacks Consensus Estimate currently stands at $160 million.  

For the Acetyl Chain segment, net sales are projected to decline roughly 13.4% year over year as the Zacks Consensus Estimate for the same is currently pegged at $908 million.

Factors at Play

Celanese’s strategic measures including cost savings through productivity initiatives, price increase actions and efficiency enhancement are expected to support its earnings in the June quarter. Its bottom line is expected to be aided by productivity actions and operational improvement.

The company’s EM unit is poised for growth on the back of acquisitions, new business wins, growth in Asia and significant project commercialization. Acquisitions including SO.F.TER., Nilit and Omni Plastics are expected to contribute to earnings expansion in the EM segment.

However, Celanese is exposed to a challenging business environment, partly due to economic weakness across Europe and Asia. The company is witnessing a slowdown in demand and it does not expect a significant improvement in demand in the second quarter. Lower global demand is hurting the Acetyl Chain unit.

Celanese also faces volume and pricing pressure in its Acetate Tow segment. Low utilization rates across the tow industry are affecting volumes of acetate tow. Lower tow prices are, in turn, pressuring Acetate Tow earnings. Demand and utilization rates remain subdued across the tow industry. As such, margins for the Acetate Tow unit are expected to remain under pressure in the to-be-reported quarter.

The company is also exposed to margin pressure from raw material cost inflation. It is taking pricing actions amid an inflationary environment.

Earnings Whispers
Our proven model does not show that Celanese is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. This is not the case here as you will see below:
Earnings ESP: Earnings ESP for Celanese is -0.53%. This is because the Most Accurate Estimate is currently pegged at $2.34 while the Zacks Consensus Estimate stands at $2.35. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Celanese carries a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult.  

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.

Stocks to Consider

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

Yamana Gold Inc. (AUY - Free Report) has an Earnings ESP of +25% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Arconic Inc. (ARNC - Free Report) has an Earnings ESP of +0.83% and carries a Zacks Rank #1.

AK Steel Holding Corporation (AKS - Free Report) has an Earnings ESP of +71.43% and carries a Zacks Rank #3.
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