Investing.com -- KeyBanc Capital Markets upgraded Celanese (NYSE:CE) Corp to “Overweight” from “Sector Weight,” citing expectations of a modest earnings recovery and improved margins in the company’s Engineered Materials segment.
The firm set a price target of $76, with a long-term fair value estimate of $90.
KeyBanc believes Celanese’s earnings have likely reached a trough, with EPS expected to return to a normalized level of over $11 within the next two to three years.
The Engineered Materials segment, which has been pressured by weak demand in autos and durables, is viewed as more cyclical than structural, offering upside as demand stabilizes.
Early signs of success in raising EM prices could partially restore severely depressed margins, KeyBanc said, adding that the end of polymer destocking could further boost EM performance by 2025.
KeyBanc remains cautious on Celanese’s Acetyls business, which faces ongoing headwinds. Despite this, the firm expects Celanese’s overall performance to improve, supported by cost rationalization efforts and footprint optimization.
Celanese’s recent debt refinancing, which has extended its maturity profile and alleviated worst-case downside scenarios. Management’s intent to pursue additional asset sales to reduce leverage further strengthens the company’s financial position.
KeyBanc noted that Celanese could be a major beneficiary of a potential resolution to the Ukraine conflict and better demand from China driven by recent government stimulus, though it acknowledged the uncertainty surrounding these outcomes.
The firm cautioned that a recession or a sharp downturn in the automotive sector could weigh on Celanese shares, given its high leverage, but emphasized that the current depressed earnings level skews outcomes to the upside.