Why Is Celanese (CE) Down 7.5% Since Its Last Earnings Report?

It has been about a month since the last earnings report for Celanese Corporation (NYSE:CE) . Shares have lost about 7.5% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to its next earnings release, or is CE due for a breakout? Before we dive into how investors and analysts have reacted of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important catalysts.

Celanese Beats Earnings and Revenue Estimates in Q4

Celanese kept its earnings streak alive with a beat in fourth-quarter 2017. The company logged adjusted earnings per share of $1.98 in the quarter, up 30.3% from $1.52 a year ago. The figure surpassed the Zacks Consensus Estimate of $1.86.

Also, revenues of $1,593 million were up roughly 21.5% year over year. The top line outpaced the Zacks Consensus Estimate of $1,530 million.

FY17 Results

For 2017, the company posted profits from continuing operations of $856 million or $6.19 per share, compared with $902 million or $6.19 per share a year ago. Adjusted earnings for the year came in at $7.51 per share, up 13.6% from $6.61 in 2016.

Additionally, Celanese reported revenues of $6.1 billion, up around 13.9% from $5.4 billion reported in 2016.

Segment Review

Material Solutions: At this segment, the Advanced Engineered Materials (AEM) unit delivered operating profit of $91 million and record adjusted EBIT of $135 million.

Tow volume and pricing declined in the quarter mainly as a result of lower tow industry utilization which was in line with the company’s expectations.

Acetyl Chain: The unit is well positioned and the flexibility in its global supply chain allowed it to rapidly respond to changes in utilization rates, particularly in China. Operating profit was $176 million in the fourth quarter, up 104.7% year over year.

Financials

Cash and cash equivalents were $576 million as of Dec 31, 2017, down 9.7% year over year. Long-term debt was up 14.7% to $3,315 million as of Dec 31, 2017. Capital expenditure in 2017 was $267 million.

For 2017, Celanese generated operating cash flow of $803 million and free cash flow of $825 million (before taking into account $316 million of contribution to pension plans). Furthermore, the company returned $741 million to shareholders in 2017, including $241 million of dividends.

Outlook

Going forward, the company expects the AEM pipeline model to evolve to an increased level of project volume and the Acetyl Chain unit to continue the momentum from its improved model. Tow earnings is anticipated to remain relatively flat. In 2018, Celanese expects its adjusted earnings to grow in the 10-14% range with more growth to be witnessed in the first half of the year.

How Have Estimates Been Moving Since Then?

It turns out, fresh estimate have trended upward during the past month. There has been one revision higher for the current quarter. In the past month, the consensus estimate has shifted by 17.6% due to these changes.

Celanese Corporation Price and Consensus

Celanese Corporation Price and Consensus | Celanese Corporation Quote

VGM Scores

At this time, CE has a subpar Growth Score of D, however its Momentum is doing a lot better with a B. Following the exact same course, the stock was allocated a grade of B on the value side, putting it in the top 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of C. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks' style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of this revision also looks promising. Notably, CE has a Zacks Rank #3 (Hold). We expect an in-line return from the stock in the next few months.