On Wednesday, KeyBanc made an adjustment to the financial outlook for Celanese Corporation (NYSE:CE), a global chemical and specialty materials company. The firm's analyst reduced the price target on the company's shares to $180 from the previous $190 while maintaining an Overweight rating.
The revision follows Celanese's announcement on June 7, 2024, of a force majeure on its acetyls production in the United States, which includes acetic acid and vinyl acetate monomer (VAM), due to supplier-related raw material challenges. This situation is expected to affect 15-20% of the company's production in the second quarter. While no specific financial impact was disclosed, the company indicated that the primary concern would be higher production costs rather than a loss of volume.
KeyBanc's current estimates include an assumed financial headwind of $15 million for both the second and third quarters. Despite the production issues, Celanese management expressed that they would be surprised to see any upward movement in spot pricing for acetyls, attributing this to sufficient supply levels that meet the current soft demand.
Furthermore, despite the broader industry revising down its 2024 auto production forecasts, Celanese has not perceived a change in customer interactions and continues to anticipate the market to remain stable or experience a slight year-over-year increase.
Additionally, the company has noted some increases in the cost of raw materials for its Engineered Materials (EM) segment this year but does not express significant concern over price/cost benefits throughout the year.
Celanese is optimistic about the largest cost benefit being in nylon and expects that these tailwinds could extend into the third quarter. The company's stance reflects a level of confidence in its ability to manage the current challenges without significant disruption to its financial performance.
In other recent news, Celanese Corporation has been navigating significant production challenges due to supply chain disruptions, leading to a declaration of force majeure. This has resulted in a forecasted 15-20% reduction in second-quarter production of acetic acid and vinyl acetate monomer.
Despite these operational difficulties, Celanese 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.
Several analyst firms have adjusted their outlooks for Celanese. Wells Fargo (NYSE:WFC) lowered its price target to $180, citing concerns over weak demand and operational challenges, while maintaining an Overweight rating. Jefferies reduced its price target to $155, Deutsche Bank (ETR:DBKGn) to $160, and BofA Securities to $144, all maintaining a Hold rating. Meanwhile, Citi maintained a Neutral rating on Celanese shares with a $167 price target.
On a more optimistic note, BMO Capital Markets, RBC Capital, and Baird raised their price targets to $158, $176, and $180 respectively, reflecting expectations of Celanese's resilience and potential for growth despite current challenges.
InvestingPro Insights
As Celanese Corporation (NYSE:CE) navigates the challenges of force majeure and fluctuating raw material costs, investors and analysts are closely monitoring its financial health and stock performance. According to recent data, Celanese boasts a solid market capitalization of $14.35 billion, reflecting its significant presence in the chemical industry. The company's P/E ratio stands at an attractive 7.2, suggesting that the stock may be undervalued relative to its earnings. Additionally, the PEG ratio of 0.21 indicates potential for growth when considering the P/E ratio in the context of earnings growth expectations.
From an investment perspective, Celanese has demonstrated a commitment to returning value to shareholders, as evidenced by its impressive track record of raising dividends for 14 consecutive years. This aligns with the company's high shareholder yield, which is a key metric for income-focused investors. Moreover, the dividend yield currently sits at 2.13%, offering a steady income stream. Despite some analysts revising their earnings estimates downwards for the upcoming period, Celanese's low price volatility and strong free cash flow yield suggest resilience and financial stability.
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