CE - Celanese - production and sale of industrial chemicals primarily in North America, Europe, and Asia

Celanese Corp. (CE) is a company on the upswing. It just reported solid first quarter results on Apr 24 that included sales growth of 19% from the year before. This translated into adjusted earnings of $1.06 per share, well ahead of analyst expectations. Moving forward, Celanese said it anticipates strong international demand and continued pricing strength, which should help fuel the underlying data to support its share price.

Celanese Corporation engages in the production and sale of industrial chemicals primarily in North America, Europe, and Asia. Net sales totaled $6.4 billion in 2007, with approximately 70% generated outside of North America. The company has a market cap. of $4.73 billion, was founded in 2004 and is headquartered in Dallas, Texas.

First Quarter Results

Celanese reported respectable first quarter results on Apr 24 in which net sales were up 19% from the year prior to $1.846 billion. The company cited its downstream businesses, higher volume and favorable currency exchanges as the primary drivers of growth.

Net earnings decreased to $145 million from $201 million last year, primarily due to a $79 million restructuring gain from the year prior. Adjusted earnings for the period were $1.06 per share compared to 77 cents last year. Also, during the first quarter, Celanese generated $166 millions in cash from operating activities compared to $12 million last year.

Guidance Boosted

After the solid quarterly results, Celanese boosted its guidance. Due to strong demand and a favorable pricing environment, the company now expects full-year earnings of $3.60 to $3.85 per share, compared to $3.40 to $3.70 before.

The analyst community is even more bullish, with the full-year consensus estimate pegged at $3.93 cents, up from $3.90 just seven days ago.

The bar is being raised for Celanese both internally and externally, but the company has shown it knows how to surprise and beat earnings projections. Over the last four quarters Celanese has bested analyst expectation by an average of nine cents, or 12.32%.

Celanese also bears the favor of carrying attractive valuations. Based upon current-year earnings projections, this stock is only trading at a P/E multiple of just over 11X. The company also looks well insulated from any overbearing debt, carrying a 2.99 debt-to-equity multiple.

The Chart

With all the good news on hand, the company's share price has been advancing. SInce bottoming out on Mar 20 just above $34, this stock has recently topped off over $45, an impressive short-term pop of over 32%. In the process, this stock logged a new 52-week and all-time high. Moving forward, the company should produce the earnings to support its stock price. Taka a look at the nice recent up move in the chart below.

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CE - Celanese - attractively valued at about 12x next year's estimates. This is below the industry average and the broader market

Celanese has some lofty goals, but they are well on their way to achieving them. CE's goal is to grow at 2X GDP. The key is to grow Asian revenues from 25% to 30-35% of sales and from 30% to 45-55% of earnings. The stock is attractively valued at about 12x next year's estimates. This is below the industry average and the broader market. This year's earnings estimates have risen 19 cents to $3.19 per share over the past 60 days.

Full Analysis

Celanese (CE) is a large American chemical company based in Dallas, Texas. The company produces chemicals, fibers, pharmaceuticals and plastics, such as the thermoplastic cellulose acetate used to produce cigarette filters. Celanese is the world's largest producer of acetyl products, including acetic acid, vinyl acetate monomer and polyacetals.

Their largest plant in Pasadena, Texas is home to the world's largest acid production unit. The company concentrates in four different business segments targeting the consumer and industrial products market: Chemical Products, Ticona, Acetate Products and Performance Products. Celanese is one of the lowest-cost producers of key building block chemicals in the acetyls chain, such as acetic acid and VAM.

The company has a planned $300 - $350M EBITDA profit improvement by 2010. The drivers for success are restructuring, innovation, organic growth, and a focus on Asia. About $100-150 million of this improvement is from low cost Asian expansions. Celanese has annual free cash flow in excess of $400M With the completion of the 8.5 million share repurchase in July, Celanese is continuing to evaluate additional share repurchases.

CE's goal is to grow at 2X GDP. The key is to grow Asian revenues from 25% to 30-35% of sales and from 30% to 45-55% of earnings. China is responsible for 30 35% of earnings growth. Celanese is one of a very few companies operating a large-scale chemical plant independently.

Additionally, the company is aligned with China s National Tobacco Company in the production of acetate filter tow for cigarettes. China is one of the few regions in the world exhibiting any real growth (3.0-3.5% per year) in this segment. Although acetic acid, VAM and acetate tow are all commodity products, Celanese will operate in an environment removed from many competitive challenges present outside of China.

About 95% of products have a number one or two market position. This commodity chemical segment comprises approximately 70% of sales revenue. CE has 30% of the world s acetic acid production, which uses methanol as a raw material. In Acetic Acid, Celanese has 25% of the market, and the top-2 players have 50% of the world market.

The stock is attractively valued at about 12x next year's estimates. This is below the industry average and the broader market. This year's earnings estimates have risen 19 cents to $3.19 per share over the past 60 days. Analysts are expecting a further 12.7% jump in earnings next year. Additionally, the company has posted an average surprise of 19.4% over the past four quarters.

Content Courtesy: Zacks Investment Research

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To truly take advantage of the Zacks Rank, you need to first understand how it works. That is why we created the free special report: Zacks Rank Guide: Harnessing the Power of Earnings Estimate Revisions.

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