On Monday, RBC Capital updated its outlook on Celanese Corporation (NYSE:CE) shares, increasing the price target to $176 from $171, while reiterating an Outperform rating.
This adjustment reflects the analyst's expectation of rising acetic acid demand, Celanese's reaffirmation of its fiscal year 2024 guidance, and the company's ability to meet its earnings per share (EPS) targets despite potential continued soft demand.
Celanese, a global chemical and specialty materials company, has experienced lower acetic acid prices in the first quarter, extending into April. However, the company anticipates that new downstream capacity coming online in the second quarter will bolster demand.
The firm's confidence in a stronger second half of the year is underscored by its consistent fiscal year 2024 guidance, projecting robust financial performance.
The analyst highlighted that even with subdued demand, Celanese is poised to achieve its $11.50 EPS guide midpoint. This confidence is based on the benefits from lower raw material costs, operational synergies, and favorable year-over-year comparisons.
The raised price target of $176 hinges on an unchanged 11.0 times multiple of the firm's estimated $2.70 billion fiscal year 2024 EBITDA, an increase from the previous estimate of $2.615 billion.
Celanese's financial outlook is further supported by its strong free cash flow, which is expected to be around $1.3 billion in fiscal year 2024. Additionally, the company has the potential to pay down more than $2 billion in debt by the first quarter of 2025.
Celanese is also committed to maintaining its dividend, which is projected to be approximately $300 million. These financial strategies underscore the company's stable financial position and its ability to return value to shareholders.
InvestingPro Insights
As Celanese Corporation (NYSE:CE) continues to navigate through fluctuating acetic acid prices and anticipates stronger demand in the upcoming quarters, the company's financial health remains a focal point for investors. According to real-time data from InvestingPro, Celanese boasts a robust market capitalization of $17.11B and maintains an attractive P/E ratio of 8.6, hinting at a potentially undervalued stock in relation to its earnings. Furthermore, the company's PEG ratio, standing at 0.25 for the last twelve months as of Q1 2024, suggests a favorable growth trajectory when pegged against its earnings growth.
InvestingPro Tips highlight Celanese's strong shareholder-friendly actions, including a high shareholder yield and a commendable history of raising its dividend for 14 consecutive years. Additionally, the company's valuation implies a strong free cash flow yield, which aligns with the analyst's positive outlook on Celanese's ability to generate significant free cash flow in fiscal year 2024. For investors seeking a more in-depth analysis, there are over 10 additional InvestingPro Tips available, offering a comprehensive view of Celanese's financial and market position. Utilize coupon code PRONEWS24 to receive an additional 10% off a yearly or biyearly Pro and Pro+ subscription at InvestingPro.
While some analysts have revised earnings expectations downwards for the upcoming period, the overall sentiment is buoyed by the company's low price volatility and a significant price uptick over the last six months, as evidenced by a 34.18% six-month price total return. As investors consider RBC Capital's revised price target, these metrics and insights serve to provide a multifaceted understanding of Celanese's investment potential.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.