Celanese Corp. (CE) announced that it would release its results for the second quarter of 2011 before the market opens on July 21, 2011.
Celanese reported adjusted earnings of 96 cents per share in the first quarter of 2011, beating the Zacks Consensus Estimate of 83 cents. Diluted earnings per share in the quarter were 87 cents versus 6 cents in the prior-year quarter. In the upcoming quarter, the Zacks Consensus Estimate for Celanese is pegged at a profit of $1.41 per share, reflecting an annualized growth of 25.50% of Zacks Consensus.
With respect to earnings surprises, the company outdid the Zacks Consensus Estimate in all the four trailing quarters. This is reflected in the average earnings surprise of 12.41%, with positive surprises in each of the quarters involved.
First Quarter Review
On April 26, 2011, Celanese Industries announced its first-quarter 2011 results. Celanese reported adjusted earnings of 96 cents per share in the first quarter of 2011, outpacing the Zacks Consensus Estimate of 83 cents. Diluted earnings per share were 87 cents versus 6 cents in the prior-year quarter.
Quarterly revenues grew 14% year over year to $1.6 billion, primarily driven by higher volumes across all business segments as well as improved volumes. Results were above the Zacks Consensus Estimate of $1.5 billion. Operating profit jumped to $188 million from a loss of $14 million in the prior-year quarter. Operating margins came in at a positive 8.5% from a negative 99% last year.
Cash and cash equivalents at the end of the first quarter of 2011 was $722 million versus $1,139 million in the same period in 2010. Cash flow provided by operating activities was $132 million for the reported quarter compared with $55 million in the prior-year period, as higher trade working capital and higher cash taxes offset the improved operating performance. Total debt was $2.5 billion versus $2.48 billion in the prior year.
Encouraged by the strength of its first-quarter 2011 performance, its confidence in its earnings growth programs, and its expectations for a continued, modest global economic recovery, the company raised its outlook for the full-year 2011. The company at present expects 2011 operating EBITDA to be at least $200 million higher than 2010’s results of $1,122 million and adjusted earnings per share to be at least $0.85 higher than 2010’s results of $3.37, based on a tax rate and diluted share count of 17% and 158.7 million shares, respectively.
Agreement of Estimate Revisions
Out of the 9 analysts covering the stock for the second quarter of fiscal 2011, 2 analysts revised the stock upward in the last 30 days, while none of the analyst made any revision to the stock in the last 7 days. Similarly, for fiscal year 2011, out of the 8 analysts covering the stock, 1 analyst revised the stock upward in the last 30 days, while none of the analyst made any revision to the stock in the last 7 days.
Magnitude of Estimate Revisions
The second-quarter 2011 estimate was flat at $1.41 in the last 7 days, whereas it increased by 5 cents, from $1.36 to $1.41 in the last 30 days. For fiscal year 2011, earnings estimate was flat at $4.36 in the last 7 days as well as in the last 30 days.
Celanese is one of the world’s largest producers of acetyl products, as well as a leading global producer of high-performance engineered polymers. The company’s earnings outlook has been improving driven by the strong performance in the Advanced Engineered Materials business.
The company is operating its facilities in the Acetyl Intermediates segment at above the industry utilization rates of 80%, which provides cost advantages. Capacity utilization has also improved in the Industrial Specialties segment due to the rising demand in the Asia Pacific.
However, Celanese is exposed to volatile raw material (natural gas, ethylene and methanol) prices used in the production of basic chemicals in the Acetyl Intermediates segment, principally formaldehyde, acetic acid and vinyl acetate monomer.
The company also faces stiff competition from larger peers, E.I. DuPont de Nemours and Co. (DD) and The Dow Chemical Co. (DOW) in the Advanced Engineered Material Segment as well as in the Industrial Specialties segment. Celanese’s balance sheet leverage is also relatively high, which limits its financial flexibility.
Currently, Celanese has a short-term (1 to 3 months) Zacks #2 Rank (Buy) and a long-term (6 months and higher) Neutral recommendation.