On Friday, Citi reiterated a Neutral rating with a $167.00 price target on shares of Celanese Corporation (NYSE: NYSE:CE), a global chemical and specialty materials company. The reiteration follows the company's announcement of a force majeure and sales control for two of its key products, acetic acid and vinyl acetate monomer (VAM).
Celanese has been facing significant challenges due to force majeure conditions and operational failures from several suppliers of critical raw materials, which are crucial for the production of acetic acid and VAM. Senior Vice President of the Acetyl Chain at Celanese, Mark Murray, indicated that these disruptions are expected to negatively affect the company's second-quarter 2024 production in the U.S. Gulf Coast (USGC) by 15-20%.
Murray also pointed out that the financial impacts for the second quarter of 2024 would arise from the additional costs associated with operating at higher-cost facilities, sourcing externally, and managing logistics to mitigate customer impacts. These are compounded by the volume effects due to the estimated production shortfall.
While this situation poses challenges for Celanese, Citi suggests that there may be a slight positive impact on LyondellBasell Industries (NYSE: NYSE:LYB) and Eastman Chemical Company (NYSE: NYSE:EMN) due to the temporary tightness in supply. However, the firm also cautions that LyondellBasell could experience similar supply disruptions in the USGC area.
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 in the Western Hemisphere. 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
Celanese Corporation (NYSE: CE) exhibits a blend of stability and value that might appeal to investors seeking solid returns. With a P/E ratio of 7.99 and an adjusted P/E ratio of 9.86 for the last twelve months as of Q1 2024, the company is trading at attractive earnings multiples. This is particularly noteworthy considering the company's consistent history of dividend payments, having maintained them for 20 consecutive years. Furthermore, the InvestingPro Tips highlight that Celanese has raised its dividend for 14 consecutive years, underscoring a commitment to shareholder returns.
The company's strong free cash flow yield, as implied by its valuation, is another point of interest for investors. Additionally, the stock is known for its low price volatility, which can be a reassuring factor for investors who prioritize stability. For those looking to delve deeper into the financials and strategic insights, InvestingPro offers a range of additional tips to consider. For instance, there are 8 more tips available on InvestingPro for Celanese, which can be accessed by visiting https://www.investing.com/pro/CE. Readers interested in these insights can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
Investors should be aware that despite the operational challenges faced by Celanese, analysts predict the company will remain profitable this year. The resilience of the company’s financials is evident from its revenue growth of 7.11% over the last twelve months as of Q1 2024, and a robust gross profit margin of 23.61%. These figures, combined with a dividend yield of 1.9%, could make Celanese an attractive option for dividend-seeking investors.
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