Celanese's (CE) Earnings Top, Sales Trail Estimates In Q3

Celanese Corporation (NYSE:CE) logged earnings from continuing operations of $2.17 per share in third-quarter 2019, down from $3.00 in the year-ago quarter.

Barring one-time items, adjusted earnings were $2.53 a share, down from $2.96 in the year-ago quarter. It, however, topped the Zacks Consensus Estimate of $2.50.

Revenues of $1,586 million fell roughly 10% year over year and lagged the Zacks Consensus Estimate of $1,624 million. The chemical maker witnessed continued demand weakness during the reported quarter.

Celanese Corporation Price, Consensus and EPS Surprise

Celanese Corporation price-consensus-eps-surprise-chart | Celanese Corporation Quote

Segment Review

Net sales in the Engineered Materials unit were $591 million in the quarter, down 8% year over year. Sales were hurt by lower volumes, prices and unfavorable currency impact. Volumes were impacted by soft global demand. The company commercialized 1,315 projects during the quarter. It is on track to commercialize more than 4,000 projects in 2019.

The Acetyl Chain segment posted net sales of $867 million, down around 14% year over year. Sales were affected by reduced pricing as well as unfavorable currency impact that more than offset higher volumes.

Net sales in Acetate Tow segment were $158 million, flat year over year. Volumes and prices were stable year over year in the quarter.

Financials

Celanese ended the quarter with cash and cash equivalents of $497 million, down around 29% year over year. Long-term debt was up roughly 5% year over year to $3,359 million.

Celanese generated operating cash flow of $397 million and free cash flow of $315 million during the quarter. Capital expenditure was $82 million for the quarter. Moreover, the company returned $352 million to shareholders through dividends and share repurchases during the reported quarter.

Outlook

Celanese lowered its adjusted earnings per share guidance for 2019, factoring in its expectations that market conditions are not likely to improve this year. The company now sees adjusted earnings in the band of $9.60-$9.80 per share, compared with its prior view of roughly $10.50. The company expects demand weakness to continue through 2019.

The revised earnings guidance also incorporates the fourth-quarter impact of earlier announced unplanned outage at the company’s Clear Lake facility in Texas. On Sep 21, 2019, a localized fire broke out in the carbon monoxide production unit of the facility.

The company also noted that it will remain focused on executing its productivity programs, enhancing business model and investing in high-return projects which it expects to deliver double-digit growth in adjusted earnings per share in 2020.

Celanese expects to deliver 2020 adjusted earnings in the band of $11-$12 per share factoring in an uncertain demand outlook. The company expects to achieve the top end of this range if demand conditions improves next year.

Price Performance

Celanese’s shares have gained 34.8% year to date, outperforming its industry’s 16.4% rise.

Zacks Rank & Key Picks

Celanese currently carries a Zacks Rank #4 (Sell).

Better-ranked stocks worth a look in the basic materials space include Agnico Eagle Mines Limited (NYSE:AEM) , Kinross Gold Corporation (NYSE:KGC) and Franco-Nevada Corporation (TSX:FNV) , all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 158.6% for the current year. The company’s shares have rallied 43% in a year’s time.

Kinross has projected earnings growth rate of 170% for the current year. The company’s shares have surged around 61% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 35.9% for the current year. The company’s shares have gained roughly 43% in a year’s time.

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