On Thursday, RBC Capital Markets revised its outlook on Celanese Corporation (NYSE:CE), shifting from a previously optimistic stance to one of caution. The firm downgraded Celanese’s stock rating from Outperform to Sector Perform and significantly reduced the price target to $56.00 from the former $84.00. The stock, currently trading at $54.91, has experienced a significant decline of 57% over the past six months, according to InvestingPro data.
The downgrade by RBC Capital analysts was prompted by concerns about Celanese’s overexposure to the automotive end markets, particularly in Europe where internal combustion engine (ICE (NYSE:ICE)) vehicles are prevalent. The analysts noted that near-term earnings are being challenged by lower production and excess inventory across the supply chain. This situation has been exacerbated by reduced operating rates which affected the company’s performance in the second half of 2024. With a debt-to-equity ratio of 2.49 and negative return on equity, InvestingPro analysis suggests the company faces significant financial challenges, though its Fair Value indicates potential undervaluation.
Celanese’s recent acquisition of a portion of DuPont (NYSE:DD)’s Mobility & Materials (M&M) business was intended to create synergies. However, RBC Capital analysts pointed out that the benefits from this integration are heavily dependent on volume, casting doubt on the timing of any significant earnings improvement for the company.
Reflecting these concerns, RBC Capital has also adjusted its forecasts for Celanese’s earnings before interest, taxes, depreciation, and amortization (EBITDA). The firm lowered its Q1 and full-year 2025 EBITDA estimates to $382 million and $2.0 billion, respectively, down from the previous projections of $548 million and $2.35 billion. The new price target is based on an unchanged 8.0x FY25E EBITDA multiple, which takes into account the challenges in the automotive market and Celanese’s high leverage, which stood at 4.7x at the end of 2024. For deeper insights into Celanese’s valuation and financial health metrics, investors can access the comprehensive Pro Research Report available on InvestingPro.
Investors are closely monitoring these developments as they assess the impact of sector-specific issues on Celanese’s financial performance and stock valuation. The company’s shares are now being watched with a more conservative lens, given the headwinds in the automotive sector that are influencing its near-term earnings potential. With the stock trading near its 52-week low of $52.97 and a market capitalization of $5.98 billion, InvestingPro subscribers can access additional insights through 13 exclusive ProTips and comprehensive financial metrics.
In other recent news, Celanese Corporation reported its Q1 2025 earnings, revealing an earnings per share (EPS) of $1.45, which exceeded the forecast of $1.25. However, the company’s revenue fell short of expectations, coming in at $2.37 billion against a projected $2.39 billion. Despite the positive earnings surprise, Jefferies adjusted its price target for Celanese from $70.00 to $55.00, maintaining a Hold rating, while BMO Capital Markets reduced its target from $73.00 to $46.00, retaining an Underperform rating. BMO cited macroeconomic challenges and excess capacity in Celanese’s platforms as factors influencing the lowered target. Celanese has been actively addressing these challenges, including appointing new leadership in its Engineered Materials segment. Jefferies noted ongoing issues in the automotive supply chain, impacting future earnings estimates. These developments highlight the complexities Celanese faces in the current economic landscape, with a focus on strategic initiatives to enhance cash generation and reduce leverage.
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