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Category: Stock Market and Celanese
Date: 22 October 2019 Stock Price: $121.31 We take a look at the 3rd quarter earnings report of their 2019 fiscal year of Celanese, a chemicals and speciality products maker that employs roughly 7 500 people across the world.
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About Calenese Corporation
Celanese Corporation (NYSE: CE), a global chemical and specialty materials company. We produce products that make our lives a little easier, by helping customers to bring their inspired ideas and innovations to life. From the global production network of our Acetyl Chain, we provide materials that are critical to the global chemicals and paints and coatings industries. From our broad portfolio of Materials Solutions, we advance automotive and consumer electronic designs and enable life-improving medical, food and beverage products – we offer solutions to our customers to help them succeed.
While we call Dallas, Texas home for our headquarters, we have approximately 7,500 employees working to serve our customers around the world. From Dallas to Amsterdam to Shanghai, we manage a global network of commercial offices, technical centers, and twenty-seven production facilities and additional strategic affiliate production facilities.
While we call Dallas, Texas home for our headquarters, we have approximately 7,500 employees working to serve our customers around the world. From Dallas to Amsterdam to Shanghai, we manage a global network of commercial offices, technical centers, and twenty-seven production facilities and additional strategic affiliate production facilities.
Overview of Celanese's latest earnings report
Data below is reported for the latest quarter unless stated otherwise
- Sales: $1.586 billion (down from $1.771 billion for the same quarter of the previous year)
- Sales decreased by -10.44% over the last 12 months
- Cost of sales: $1.172 billion (down from $1.255 billion for the same quarter of the previous year)
- Cost of sales decreased by -6.6% over the last 12 months
- Net income: $263 million (down from $401 million for the same quarter of the previous year)
- Diluted earnings per share: $2.13 (down from $2.96 for the same quarter of the previous year)
- PE ratio: 14.2
- Diluted weighted-average shares outstanding: 123.3 million (down from 135.5 million for the same quarter of the previous year)
- Cash and equivalents: $497 million
- Cash and equivalents per share: $4.03
- Cash and equivalents makes up 3.3% of Celanese's market capital
- Cash and equivalents makes up 5.27 % of Celanese's total assets
- Inventories: $994 million
- Inventories makes up 10.6% of Celanese's total assets
- Stockholders equity: $2.747 billion
- Stockholders equity per share: $22.27
- So Celanese is trading times its stockholders equity per share which is 5.4 times its stockholders equity per share which is outside the expected range of between 2 and 4 times that most firms tend to trade at.
- Cash generated from operations: $397 million
- Cash generated from operations per share : $3.22
Celanese's management commentary on the results and outlook
Celanese Corporation (NYSE: CE), a global chemical and specialty materials company, reported third quarter GAAP diluted earnings per share of $2.17 and adjusted earnings per share of $2.53, both sequential improvements over the prior quarter. The Company delivered net sales of $1.6 billion as 2 percent sequential volume growth offset the impact of a 1 percent decline in both pricing and foreign exchange. Despite no meaningful improvement in market demand over the second quarter, the Company recorded sequential growth in both Engineered Materials and the Acetyl Chain via their differentiated business models while again displaying a stable earnings profile in Acetate Tow. The Company generated operating cash flow of $397 million and free cash flow of $315 million. Celanese returned $352 million of cash to shareholders in the quarter via $275 million in share repurchases and $77 million in dividends, bringing the total year-to-date cash returned to $1.0 billion. Based on an expectation that market conditions are unlikely to improve in 2019, and including the impacts of the previously announced unplanned Clear Lake outage, the Company expects to deliver 2019 adjusted earnings between $9.60 and $9.80 per share.
- Finalized permitting for the expansion of Clear Lake acetic acid to 2.0 million tons per year and Fairway methanol to 1.7 million tons per year, as part of the global acid reconfiguration. Engineering work progresses on both projects.
- Completed the addition of new compounding lines in both Nanjing and Suzhou, China to meet growing demand from Engineered Materials' customers in Asia.
- Named ICIS Company of the Year for 2018 based on analysis of 2018 financial metrics, robust profitability in the Acetyl Chain, and accelerated project commercialization in Engineered Materials.
- Commercialized 1,315 Engineered Materials project wins in the third quarter of 2019 and on track to deliver more than 4,000 projects for the year.
- Repurchased 2 percent of outstanding shares in the third quarter and 10 percent of outstanding shares over the last twelve months.
Outlook
"Our businesses and teams have displayed remarkable resilience in the third quarter to deliver sequential growth despite tremendous challenges including a weak market demand backdrop as well as the incident at Clear Lake in the final weeks of the quarter," said Lori Ryerkerk, chief executive officer. "With few indications of sustained improvement up to this point, we now expect that low demand levels are likely to persist through the remainder of the year. Incorporating the financial impact of the Clear Lake incident to the fourth quarter, we expect 2019 adjusted earnings of $9.60 to $9.80 per share. Our final performance within the range will depend on the evolution of demand conditions and timing of the restart of the Clear Lake CO unit. Looking forward to 2020, we remain focused on controllable factors including productivity initiatives, business model enhancements, and high-return capital deployment that will deliver double-digit adjusted earnings per share growth next year, whether or not current demand conditions improve.
At this stage, given an uncertain demand outlook, we expect 2020 adjusted earnings of $11 to $12 per share, with the higher end of the range achievable if we see improvement in demand conditions next year. We are still working a number of controllable actions and will have more visibility to further clarify the outlook as we get into next year and can assess early business conditions across the globe."
The Company is unable to reconcile forecasted adjusted earnings per share growth to US GAAP diluted earnings per share without unreasonable efforts because a forecast of Certain Items, such as mark-to-market pension gains/losses, is not practical.
"Our businesses and teams have displayed remarkable resilience in the third quarter to deliver sequential growth despite tremendous challenges including a weak market demand backdrop as well as the incident at Clear Lake in the final weeks of the quarter," said Lori Ryerkerk, chief executive officer. "With few indications of sustained improvement up to this point, we now expect that low demand levels are likely to persist through the remainder of the year. Incorporating the financial impact of the Clear Lake incident to the fourth quarter, we expect 2019 adjusted earnings of $9.60 to $9.80 per share. Our final performance within the range will depend on the evolution of demand conditions and timing of the restart of the Clear Lake CO unit. Looking forward to 2020, we remain focused on controllable factors including productivity initiatives, business model enhancements, and high-return capital deployment that will deliver double-digit adjusted earnings per share growth next year, whether or not current demand conditions improve.
At this stage, given an uncertain demand outlook, we expect 2020 adjusted earnings of $11 to $12 per share, with the higher end of the range achievable if we see improvement in demand conditions next year. We are still working a number of controllable actions and will have more visibility to further clarify the outlook as we get into next year and can assess early business conditions across the globe."
The Company is unable to reconcile forecasted adjusted earnings per share growth to US GAAP diluted earnings per share without unreasonable efforts because a forecast of Certain Items, such as mark-to-market pension gains/losses, is not practical.
Celanese (NYSE: CE) stock price history
The image below, obtained from Google, shows the stock price history of Celanese over the last 5 years. And it's been a very good time for Celanese stockholders. 5 years ago it was trading at $58.40 and its currently trading at around $121.31 a stock. That's a return of 77% provided to Celanese stockholders over the last 5 years. The stock of Celanese is trading at a lot closer to its 52 week high of $127.15 than it is to its 52 week low of $82.91 which to us is a clear indication that the short term sentiment and momentum of Celanese stock is very positive.
Recent coverage of Celanese
The extract below discusses some of the latest news regarding Celanese as obtained from TheStreet.com
K 2019 - Consumer electronics and electrical components are upgrading to higher speed connectivity and massive data processing in smaller devices; and with these changes comes the need to lower signal loss and increase processing speeds, which means the materials used must provide supreme electrical and thermal performance. The broad portfolio of engineered materials from Celanese allows consumer electronics manufacturers to realize all these requests and offer the same or better appearance, design freedom and performance that consumers are demanding. Celanese (NYSE:CE), a global chemical and specialty materials company, is delivering the advanced engineered materials to consumer goods manufacturers to attract buyers through aesthetics and tactile elements that can withstand the rigors of daily use. "Next generation mobile devices focus on functionalities, better and faster data processing, and consumer experience by adding new, advanced imaging features - such as higher resolutions, augmented reality, and 3D sensing - which require better camera, screen and antenna components," said Stefan Kutta, Vice President of EMEA Commercial Operations, Celanese. "Electronics manufacturers around the world look to Celanese as their first choice supplier of engineered materials for product components and have the confidence that these materials will help them to fulfill the increasing demands for materials used in cutting-edge connected devices.
K 2019 - Consumer electronics and electrical components are upgrading to higher speed connectivity and massive data processing in smaller devices; and with these changes comes the need to lower signal loss and increase processing speeds, which means the materials used must provide supreme electrical and thermal performance. The broad portfolio of engineered materials from Celanese allows consumer electronics manufacturers to realize all these requests and offer the same or better appearance, design freedom and performance that consumers are demanding. Celanese (NYSE:CE), a global chemical and specialty materials company, is delivering the advanced engineered materials to consumer goods manufacturers to attract buyers through aesthetics and tactile elements that can withstand the rigors of daily use. "Next generation mobile devices focus on functionalities, better and faster data processing, and consumer experience by adding new, advanced imaging features - such as higher resolutions, augmented reality, and 3D sensing - which require better camera, screen and antenna components," said Stefan Kutta, Vice President of EMEA Commercial Operations, Celanese. "Electronics manufacturers around the world look to Celanese as their first choice supplier of engineered materials for product components and have the confidence that these materials will help them to fulfill the increasing demands for materials used in cutting-edge connected devices.
Celanese (NYSE: CE) latest stock valuation
So what is Celanese stock worth based on the release of their latest earnings report and the group's outlook provided? Based on Celanese latest earnings report provided our valuation model provides a target (full value) price at $122.70 a Celanese stock. We therefore believe that the stock of Celanese is fully valued.
Our target price of Celanese is up from our 2nd quarter 2019 earnings report valuation of Celanese. Main reason for the increase in our valuation of the group is the strong stock repurchase program with Celanese buying back 2% of their total stock in the last quarter and 10% of their stock in the last year. What this means is that future earnings and dividends will be spread across less amount of stock.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $122.70. Therefore we see a good entry point into Celanese stock at $110.40 or below. We expect the stock of Celanese to trade mostly sideways in coming weeks and months as it is close to our target (full value) price.
Our target price of Celanese is up from our 2nd quarter 2019 earnings report valuation of Celanese. Main reason for the increase in our valuation of the group is the strong stock repurchase program with Celanese buying back 2% of their total stock in the last quarter and 10% of their stock in the last year. What this means is that future earnings and dividends will be spread across less amount of stock.
We usually suggest long term fundamental or value investors look to enter into a stock at least 10% below our target (full value) price which in this case is $122.70. Therefore we see a good entry point into Celanese stock at $110.40 or below. We expect the stock of Celanese to trade mostly sideways in coming weeks and months as it is close to our target (full value) price.