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Celanese (CE) Scales New 52-Week High on Bright Prospects

Shares of Texas-based chemicals company Celanese Corporation CE, scaled a fresh 52-week high of $99.97 on Jul 18, before pulling back to eventually close the day at $98.89.

Celanese has a market cap of roughly $13.9 billion. Average volume of shares traded in the last three months is around 952.5k.  

Celanese has outperformed the Zacks categorized Chemicals-Diversified industry over the last three months. The company’s shares have moved up 10.5% over this period, compared with roughly 6.8% gain recorded by the industry.


Driving Factors

Celanese, in its first-quarter earnings call, announced that it expects adjusted earnings per share to increase 8–11% in 2017. Advanced Engineered Materials is also expected to continue to grow offsetting the decline in tow earnings. The Acetyl Chain is anticipated to benefit from a volatile raw materials backdrop and the current industry environment is expected to improve profits as the year progresses.

Celanese’s strategic measures including cost savings through productivity actions are expected to lend support to its earnings in 2017. The company is also likely to gain from capacity expansion and growth initiatives including acquisitions. Moreover, Celanese remains focused on returning value to shareholders.

Celanese remains focused on growth through acquisitions. The recent acquisition of Nilit's nylon compounding unit is in sync with Celanese’s plans to become a leading, global nylon compound supplier. The buyout allows Celanese to extend its global leadership position in the engineered materials business as nylon continues to be adopted in automotive, E&E, consumer and industrial applications.

Recently, Celanese and leading investment firm, Blackstone BX entered into a deal to form a joint venture (JV) that will create a global acetate tow supplier, where the former will own 70% of the JV with Blackstone owning the remaining 30%.

The JV will have an expanded global production footprint including eight fully-owned manufacturing plants and three existing JV sites. The new company, which is expected to generate 2017 annual pro forma revenues of around $1.3 billion, will be well placed to more efficiently address customers’ needs and offer the best of quality and services. The integration of technology and complementary tow assets will also result in synergies, primarily from optimization of supply chain networks and procurement of raw materials, energy, equipment and other services.

The companies also noted that commitments for $2.2 billion of debt have been received by the partners on behalf of the JV, which is expected to be supported by cash generated at the new company. Celanese will receive an initial dividend of roughly $1.6 billion following the formation of the JV, which the company is expected to deploy on investment in organic growth, acquisitions, share buybacks and debt reduction, among others.

Celanese Corporation Price and Consensus


Celanese Corporation Price and Consensus | Celanese Corporation Quote

Zacks Rank & Other Key Picks

Celanese currently carries a Zacks Rank #2 (Buy)

Some top-ranked companies in the basic materials space are The Sherwin-Williams Company SHW and Ternium S.A. TX. Both stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks Rank #1 stocks here.

Sherwin-Williams has expected long-term earnings growth rate of 11.4%.

Ternium has expected long-term earnings growth rate of 18.4%.

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