A month has gone by since the last earnings report for Celanese (CE). Shares have lost about 20.3% in that time frame, underperforming the S&P 500.
Will the recent negative trend continue leading up to its next earnings release, or is Celanese due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.
Celanese reported third-quarter 2024 earnings from continuing operations of $1.08 per share, down from $8.70 in the prior-year quarter. Adjusted earnings in the third quarter were $2.44 per share, down 2.4% from $2.50 reported a year ago. The bottom line missed the Zacks Consensus Estimate of $2.84.
Revenues of roughly $2.65 billion decreased roughly 2.7% year over year. Revenues missed the Zacks Consensus Estimate of $2.69 billion.
Celanese experienced sustained demand weakness in major end-markets such as paints, coatings and construction, as well as downturns in the Western Hemisphere automobile and industrial sectors during the reported quarter.
Net sales in the Engineered Materials unit were $1.48 billion in the quarter, down around 3% year over year. The segment reported an operating profit of $102 million and an adjusted EBIT of $237 million for the third quarter.
The Acetyl Chain segment posted net sales of $1.19 billion, down nearly 12.7% year over year. The segment generated an operating profit of $239 million and an adjusted EBIT of $276 million for the third quarter.
Celanese ended the quarter with cash and cash equivalents of $813 million, down roughly 31.4% sequentially. Long-term debt was up around 2.4% sequentially to around $11.3 billion.
Cash provided by operating activities was $79 million and free cash flow was a negative $16 million in the reported quarter. Capital expenditures were $131 million in the quarter.
Celanese anticipates a deterioration in demand in the fourth quarter due to higher-than-normal seasonal destocking in automotive and industrial markets. The company will considerably reduce output to meet this demand level and generate cash through inventory drawdowns, even though it anticipates that this destocking will only last for the quarter.
Celanese expects adjusted earnings per share of around $1.25 in the fourth quarter based on these variables. It aims to create long-term shareholder value by improving earnings, reducing costs, expanding free cash flow and deleveraging the company.
It turns out, estimates review have trended downward during the past month.
The consensus estimate has shifted -57.37% due to these changes.
At this time, Celanese has a poor Growth Score of F, a grade with the same score on the momentum front. However, the stock was allocated a grade of B on the value side, putting it in the second quintile for this investment strategy.
Overall, the stock has an aggregate VGM Score of D. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been broadly trending downward for the stock, and the magnitude of these revisions indicates a downward shift. It's no surprise Celanese has a Zacks Rank #5 (Strong Sell). We expect a below average return from the stock in the next few months.
Celanese belongs to the Zacks Chemical - Specialty industry. Another stock from the same industry, Ingevity (NGVT), has gained 12.5% over the past month. More than a month has passed since the company reported results for the quarter ended September 2024.
Ingevity reported revenues of $376.9 million in the last reported quarter, representing a year-over-year change of -15.5%. EPS of $1.10 for the same period compares with $1.21 a year ago.
For the current quarter, Ingevity is expected to post a loss of $0.08 per share, indicating a change of -138.1% from the year-ago quarter. The Zacks Consensus Estimate remained unchanged over the last 30 days.
The overall direction and magnitude of estimate revisions translate into a Zacks Rank #2 (Buy) for Ingevity. Also, the stock has a VGM Score of C.
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