On Monday, BofA Securities revised its outlook on Celanese Corporation (NYSE: NYSE:CE) shares, a global chemical and specialty materials company. The firm's analyst has lowered the price target to $144.00 from the previous $147.00 while maintaining an Underperform rating on the stock.
This adjustment comes in the wake of Celanese's recent declaration of Force Majeure in the Western hemisphere last Friday, signaling a reduction in second-quarter production of acetic acid and vinyl acetate monomer (VAM) by 15-20%.
The analyst from BofA Securities indicated that while sales volumes might be affected, the primary concern is the expected increase in unit costs and reduced margins. The most profitable U.S. facilities of Celanese, which are influenced by raw material supply issues, are likely to be the most impacted.
The initial estimates suggest a potential $20 million hit to EBITDA, which is approximately 3% of the second-quarter estimate for Celanese and around 6% for the Acetyl Chain segment.
Consequently, the second-quarter EBITDA forecast for Celanese has been revised downwards to $649 million from the previous $671 million, and the earnings per share (EPS) estimate has been adjusted to $2.62 from $2.81, positioning it at the lower end of the company's guidance range of $2.60 to $3.00.
The analyst also anticipates a continued effect into the third quarter, with a projected $15 million impact as facilities may take several weeks to restart, leading to a significant reduction in production rates for June.
The full-year projections for EBITDA and EPS have also been modified, with the new figures set at $2,688 million (down from $2,724 million) and $11.25 (down from $11.55), respectively. The revised price target of $144 reflects the anticipated decrease in earnings, as the firm reasserts its Underperform rating for Celanese Corporation shares.
In other recent news, Celanese Corporation, a global chemical and specialty materials company, has been grappling with supply chain disruptions leading to a force majeure and sales control for acetic acid and vinyl acetate monomer. This has resulted in an anticipated reduction of the company's second-quarter production by 15 to 20 percent.
Despite these challenges, the company maintains its fiscal year 2024 guidance, with an EPS forecast of $11-12, and a second-quarter guidance set at $2.60-3.00 EPS. Analysts from BMO Capital Markets, RBC Capital, and Baird have updated their outlook on Celanese shares.
BMO Capital Markets increased the price target to $158, RBC Capital raised the price target to $176, and Baird upped the price target to $180, reflecting their expectations of the company's resilience and potential for growth.
Celanese's strategic acquisitions, such as DuPont (NYSE:DD)'s mobility and materials business, and a focus on debt reduction and robust free cash flow generation, are expected to drive long-term earnings growth and return value to shareholders. These recent developments underscore the company's stable financial position despite the challenging operating conditions.
InvestingPro Insights
In light of BofA Securities' recent analysis of Celanese Corporation, additional insights from InvestingPro reveal a nuanced picture of the company's financial health and market performance. With a solid market capitalization of $16.0 billion and an attractive P/E ratio of 8.01, Celanese is trading at a low price relative to near-term earnings growth. This is further underscored by a PEG ratio of 0.24 for the last twelve months as of Q1 2024, suggesting potential for growth at a reasonable price.
An InvestingPro Tip highlights the company's consistent shareholder returns, with Celanese having raised its dividend for 14 consecutive years, which is a testament to its commitment to delivering value to its investors. Additionally, the firm's stock is known for low price volatility, providing a measure of stability in an investor's portfolio. For those interested in deeper analysis, InvestingPro offers additional tips that can be accessed with coupon code PRONEWS24 for an extra 10% off yearly or biyearly Pro and Pro+ subscriptions.
Despite recent operational challenges, Celanese's dividend yield stands at 1.91%, with the last dividend ex-date recorded on April 26, 2024. Moreover, the company has been profitable over the last twelve months, which aligns with analysts' predictions that Celanese will remain profitable this year. The current price, as of the previous close, was $146.47, with a fair value estimated at $147.61 by InvestingPro, suggesting that the stock is fairly priced. Investors looking to make informed decisions can find a total of 9 additional InvestingPro Tips for Celanese Corporation.
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