Here's Why You Should Hold Onto Celanese (CE) Stock for Now
Zacks Investment Research | Jun 21, 2021 08:19AM ET
Celanese (NYSE:CE) Corporation industry .
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Going in CE’s Favor?/h3
Celanese is benefiting from its productivity actions, investments in high-return organic projects and synergies of acquisitions. The company is also gaining from a recovery in demand across most of its end markets.
The company remains focused on executing its productivity programs that include the implementation of a number of cost reduction capital projects. It achieved gross savings of $214 million from its productivity actions in 2020. Productivity actions are also expected to support to its margins in 2021.
Celanese also continues to actively pursue acquisitions, which are providing it opportunities for additional growth, investment and synergies. The acquisitions of SO.F.TER., Nilit and Omni Plastics are expected to contribute to earnings expansion in the company's Engineered Materials segment. The Elotex acquisition also strengthened the company’s position in the vinyl acetate ethylene emulsions space. The buyout is expected to contribute to volumes in the Acetyl Chain segment.
The company is also seeing higher demand across most of its markets. It is witnessing higher demand in automotive, industrial and electronics applications. Demand for its Engineered Materials and Acetyl Chain products remains strong in most end markets.
A Few Concerns/h3
The company faces headwinds from elevated raw material costs partly due to supply constraints as witnessed in the last reported quarter. It is expected to face sustained inflation across many key raw materials as well as energy and supply chain costs associated with winter storm Uri in the second quarter of 2021. Tight availability of resins including nylon is expected to lead to raw material cost inflation in the second quarter. As such, higher input costs are expected to hurt margins in the second quarter. The company also sees a $30 million headwind in the second quarter from Uri, associated with higher product costs.
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The semiconductor shortage is also hurting automotive OEM production around the world. Weaker automotive production is likely to affect the company’s automotive order patterns in the second quarter.
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