On Wednesday, investment firm Baird adjusted its outlook on Celanese (NYSE:CE), a global chemical and specialty materials company. The firm lowered the price target on the company's shares to $110 from the previous $150 while maintaining an Outperform rating.
The revision in the price target comes as a response to the changing operational environment, which has prompted Celanese to proactively cut its dividend. Despite this adjustment, Baird acknowledges the company's strong track record of internal execution.
The firm believes that recent positive developments, such as stimulus measures in China and global interest rate cuts, may lead to a quicker earnings recovery for Celanese than currently expected by market guidance and analyst estimates.
Baird's new price target of $110 is based on approximately 11 times the estimated earnings per share (EPS) of $10.00 for the year 2025. The firm points out that, despite the aggressive de-rating, Celanese continues to be considered the top reflation play within its coverage area.
Celanese's ability to navigate the modified landscape and its potential for earnings rebound in light of global economic stimuli are key factors in Baird's continued confidence in the company. The firm's Outperform rating indicates that it views Celanese's stock as likely to perform better than the average return of the stocks it covers over the next 12 months.
The lowered price target reflects a recalibration of expectations in the face of external economic pressures and internal strategic decisions. Baird emphasizes the importance of the company's historical performance and strategic positioning in the face of these challenges.
In other recent news, Celanese Corporation has been the focus of several significant developments. Deutsche Bank (ETR:DBKGn) upgraded Celanese stock from Hold to Buy, despite a recent 26% slide in the company's share price following its third-quarter earnings release. The bank's analyst cited multiple reasons for the upgraded rating, including anticipated growth in earnings per share (EPS) from an estimated $10.50 in 2025 to over $13 in 2026 and $14.50 thereafter.
Celanese recently announced a sharp decrease in its third-quarter net earnings, which fell by 87% to $120 million. This drop in profits has prompted the company to slash its quarterly dividend by approximately 95%, starting in the first quarter of 2025. The company also plans to implement additional cost reduction measures in an effort to save over $75 million by the end of 2025.
The company's engineered materials division has been impacted by a downturn in commercial activity within the automotive and industrial sectors. As a response, Celanese has decided to temporarily shut down production facilities across all regions, expecting to generate cash through an anticipated $200 million inventory release in the fourth quarter.
Finally, Celanese's third-quarter results fell short of analyst expectations, with an adjusted earnings per share of $2.44, compared to the predicted $2.85. The company's revenue of $2.65 billion was also slightly below the forecasted $2.7 billion. Looking ahead, Celanese projects a fourth-quarter adjusted profit of $1.25 per share, which is well below the average analysts' expectations of $2.93 per share, according to LSEG.
InvestingPro Insights
Recent data from InvestingPro sheds additional light on Celanese's current financial situation and market performance, providing context to Baird's analysis. The company's stock has faced significant headwinds, with InvestingPro data showing a 28.36% decline in the past week and a 33.05% drop over the last month. This aligns with Baird's decision to lower the price target, reflecting the challenging market conditions Celanese is navigating.
Despite these short-term setbacks, InvestingPro Tips highlight some positive aspects of Celanese's financial health. The company has maintained dividend payments for 20 consecutive years, demonstrating a commitment to shareholder returns even in difficult times. Additionally, with a P/E ratio of 12.3 and an adjusted P/E ratio of 8.09 for the last twelve months as of Q3 2024, Celanese appears to be trading at attractive valuation levels.
InvestingPro Tips also suggest that the stock's current price, trading near its 52-week low, may present a potential opportunity for investors who share Baird's outlook on the company's recovery prospects. The stock's RSI indicates it may be in oversold territory, which could support Baird's view of Celanese as a top reflation play.
For investors seeking a more comprehensive analysis, InvestingPro offers 12 additional tips for Celanese, providing a deeper dive into the company's financial health and market position.
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