On Monday, BMO Capital maintained its Market Perform rating on Celanese Corporation (NYSE:CE) with a steady stock price target of $158.00. The materials science company, known for its chemical products, has declared force majeure on its North American acetic acid and vinyl acetate monomer operations due to difficulties in obtaining carbon monoxide raw materials. This supply chain issue is expected to result in a significant production decrease for the second quarter of 2024.
Celanese anticipates a 15-20% reduction in its North American acetic acid and vinyl acetate monomer production for the second quarter. The company is seeking alternative sources for the necessary feedstocks, either from its global assets or through third-party suppliers. However, these options are likely to incur higher costs and logistical challenges.
The inability to significantly adjust contracted prices in response to these higher costs means that Celanese is facing potential margin pressures for the second quarter. This situation poses a risk to the second half of the year's earnings, which are expected to increase according to the company's full-year 2024 guidance.
The analyst from BMO Capital highlighted that while Celanese is exploring various avenues to mitigate the production shortfall, the financial impact on the upcoming quarterly results is inevitable. The company's margin is anticipated to be affected due to the increased costs associated with sourcing raw materials from alternative channels.
Celanese's force majeure announcement and the anticipated production impact underline the challenges the company faces in maintaining its operations amidst supply chain disruptions. The firm's performance in the latter half of the year remains uncertain, with the second-quarter margin impact potentially influencing earnings projections for the remainder of 2024.
In other recent news, Celanese Corporation has been grappling with production disruptions due to supply chain issues. The company declared a force majeure, resulting in a projected 15-20% reduction in second-quarter production of acetic acid and vinyl acetate monomer.
Deutsche Bank (ETR:DBKGn) and BofA Securities revised their price targets for Celanese to $160 and $144, respectively, due to these challenges. Despite this, the company maintains its fiscal year 2024 guidance, with an EPS forecast of $11-12.
Analysts from BMO Capital Markets, RBC Capital, and Baird have updated their outlook, with price targets raised to $158, $176, and $180, reflecting expectations of the company's resilience and potential for growth despite current challenges. These recent developments underline Celanese's stable financial position amidst challenging operating conditions.
InvestingPro Insights
As Celanese Corporation (NYSE:CE) navigates through supply chain disruptions, real-time data and expert analysis from InvestingPro offer a deeper dive into the company's financial health and market position. With a market capitalization of $15.63 billion and a robust P/E ratio of 8.01, Celanese stands out for its financial stability. The company's commitment to shareholder returns is evident with a high shareholder yield and a track record of raising dividends for 14 consecutive years, underscoring its financial discipline and investor confidence.
InvestingPro Tips highlight that Celanese is trading at a low P/E ratio relative to near-term earnings growth, which could signal an attractive valuation for investors seeking growth at a reasonable price. Additionally, the company's strong free cash flow yield, as suggested by InvestingPro, is indicative of its ability to generate cash and sustain dividends, which it has maintained for 20 consecutive years. While analysts have revised their earnings downwards for the upcoming period, the company's historical profitability, including the last twelve months, provides a cushion against short-term headwinds.
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