Celanese Corporation (CE - Free Report) is set to release first-quarter 2020 results after the bell on Apr 27. The company’s results will likely reflect the benefits of its productivity actions and strategic acquisitions. However, weak demand and plant turnarounds are likely to have impacted its performance in the quarter.
The leading chemical and specialty materials maker delivered a negative earnings surprise of 4.8% in the last reported quarter. Sales also 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 0.6%.
Celanese’s shares have lost 29.7% over a year, compared with its industry’s 24.5% decline.
Let’s see how things are shaping up for this announcement.
What do the Estimates Say?
The Zacks Consensus Estimate for revenues for Celanese for the to-be-reported quarter stands at $1,535 million, suggesting an expected year-over-year decline of 9%.
The consensus mark for net sales for the company’s Engineered Materials (EM) unit is currently pegged at $632 million for the first quarter, indicating a 4.7% year-over-year decline.
Moreover, the Zacks Consensus Estimate for the Acetyl Chain segment’s net sales is currently pegged at $834 million, reflecting a 6.2% decline from the year-ago quarter. The same for the Acetate Tow division stands at $162 million, reflecting a 2.4% year-over-year drop.
Some Factors at Play
Soft demand conditions are likely to have weighed on first-quarter performance across EM and Acetyl Chain units. The company is seeing demand weakness across certain markets including automotive and consumer electronics.
Coronavirus-induced lockdowns and quarantine restrictions affected industrial activities globally during the first quarter, hurting demand. Automotive is among the industries that have been dealt a heavy blow. The pandemic has put brakes on automobile production due to shortage of manpower and disrupted supply of auto parts.
Moreover, results in the company’s Acetyl Chain segment are likely to have hurt, in the first quarter, by the impact of turnarounds at the company’s Clear Lake methanol facility in Texas as well as Clear Lake and Nanjing acetic acid plants. The company expects to record roughly $15-$20 million of expenses mainly related to methanol turnarounds for the first quarter.
Nevertheless, Celanese remains 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 first quarter. Benefits of acquisitions and project commercialization are also expected to get reflected on March quarter results.
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 -3.68%. This is because the Most Accurate Estimate is currently pegged at $2.13 while the Zacks Consensus Estimate stands at $2.21. 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.
Stocks Poised to Beat Estimates
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:
Verso Corporation (VRS - Free Report) , expected to release earnings on May 13, has an Earnings ESP of +20.00% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold Corporation (GOLD - Free Report) , scheduled to release earnings on May 6, has an Earnings ESP of +2.42% and carries a Zacks Rank #2.
Pretium Resources Inc. (PVG - Free Report) , expected to release earnings on May 7, has an Earnings ESP of +25.81% and carries a Zacks Rank #2.
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