Celanese Corporation CE is set to release fourth-quarter 2019 results after the bell on Jan 30. The company’s results will likely reflect the benefits of its productivity actions. However, a weak demand environment is likely to have impacted its performance in the quarter. The leading chemical and specialty materials maker delivered a positive earnings surprise of 1.2% in the last reported quarter. However, sales missed expectations as the company witnessed continued demand weakness during the period. Celanese 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 1.4%. Celanese’s shares have gained 17.3% over a year, outperforming its industry’s 11.2% rise.
Let’s see how things are shaping up for this announcement.
What do the Estimates Say? Celanese’s revenues for the fourth quarter are projected to decline 11.1% year over year, as the Zacks Consensus Estimate is currently pegged at $1,502 million. The Zacks Consensus Estimate for net sales for the company’s Engineered Materials (EM) unit is currently pegged at $592 million for the fourth quarter, indicating a 4.8% year-over-year decline. The same for the Acetate Tow division stands at $160 million, essentially flat year over year. Moreover, the Zacks Consensus Estimate for the Acetyl Chain segment’s net sales is currently pegged at $792 million, reflecting a 15.4% decline from the year-ago quarter. Factors at Play Celanese faces a sluggish demand environment, partly due to weakness across Europe and Asia. Demand weakness across end markets (particularly automotive and electronics) hurt sales in the company’s EM unit in the last reported quarter. Lower demand may have continued to hurt sales in its EM and Acetyl Chain units in the fourth quarter. Moreover, results in the company’s Acetyl Chain segment are likely to be hurt, in the fourth quarter, by the impact of the outage at the Clear Lake facility in Texas. On Sep 21, 2019, a localized fire broke out in the carbon monoxide production unit of the facility. The disruption affected production rates. Celanese also faces some pressure in its Acetate Tow segment. Low utilization rates across the tow industry are affecting volumes of acetate tow. Demand remains subdued in the tow industry. This might reflect on fourth-quarter volumes of the Acetate Tow unit. However, Celanese is committed to execute its productivity programs that include implementation of a number of cost reduction capital projects. Its strategic actions including cost savings through productivity initiatives, price increase actions and operational improvement are likely to have contributed to its bottom line in the December quarter. Benefits of acquisitions and project commercialization are also expected to get reflected on fourth-quarter results.
Zacks Model Our proven model does not conclusively predict an earnings beat for Celanese this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. Earnings ESP: Earnings ESP for Celanese is -10.79%. This is because the Most Accurate Estimate is currently pegged at $1.87 while the Zacks Consensus Estimate stands at $2.10. 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 #4 (Sell). Stocks to Consider Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter: Bunge Limited BG, scheduled to release earnings on Feb 12, has an Earnings ESP of +18.18% and carries a Zacks Rank #1. You can see . the complete list of today’s Zacks #1 Rank stocks here Royal Gold, Inc. RGLD, scheduled to release earnings on Feb 5, has an Earnings ESP of +0.78% and carries a Zacks Rank #1. Cleveland-Cliffs Inc. ( CLF Quick Quote CLF - Free Report) , scheduled to release earnings on Feb 27, has an Earnings ESP of +6.25% and carries a Zacks Rank #2. Today's Best Stocks from Zacks Would you like to see the updated picks from our best market-beating strategies? From 2017 through 2019, while the S&P 500 gained and impressive +53.6%, five of our strategies returned +65.8%, +97.1%, +118.0%, +175.7% and even +186.7%. This outperformance has not just been a recent phenomenon. From 2000 – 2019, while the S&P averaged +6.0% per year, our top strategies averaged up to +54.7% per year. See their latest picks free >>