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On Thursday, UBS analyst Joshua Spector revised the price target for Celanese Corporation (NYSE:CE) shares, decreasing it to $60.00 from the previous $72.00. The stock, currently trading near its 52-week low of $52.97, has declined over 62% in the past year. Despite this reduction, the analyst retained a Neutral rating on the stock. According to InvestingPro data, the stock’s RSI suggests oversold conditions, with 13 additional real-time signals available to subscribers. Spector’s adjustment follows Celanese’s fourth-quarter results, which, although surpassing expectations, indicated a more difficult first half of the year than anticipated, leading to a slower recovery.
Spector noted that the company is facing additional one-time items that are expected to impact the first quarter earnings, resulting in an unusually low earnings per share (EPS). The company, with current revenue of $10.28 billion, has seen its return on equity fall to -25%. Even when these items are accounted for in the second quarter, the projected quarterly EPS run-rate is approximately 30% below initial expectations. The analyst expressed difficulty in gaining confidence in a recovery of Celanese’s earnings power at this stage.
The revised earnings outlook for 2025 and 2026 reflects a significant reduction, with EPS estimates cut by 27-32%. This lower earnings level suggests that Celanese’s leverage will remain elevated for a longer period than previously thought. InvestingPro analysis reveals a concerning debt-to-equity ratio of 2.49, with detailed financial health metrics available in the Pro Research Report. The forecast for 2025 shows leverage at greater than 5 times EBITDA, declining to the low-4s in 2026. However, achieving this reduction is contingent on a substantial increase in earnings.
Celanese has recently increased its leverage limit with lenders, mitigating immediate covenant risk concerns. Nonetheless, there are ongoing questions about the company’s ability to fund debt repayments in the next one to two years. The new CEO of Celanese, along with management and board changes, has emphasized the need to enhance free cash flow (FCF) and address leverage issues, including considering divestments.
Despite these efforts, Spector mentioned that the uncertainty surrounding the company’s earnings power, coupled with the overhang of higher leverage, makes it premature to adopt a more constructive stance on Celanese stock at the moment.
In other recent news, Celanese Corporation reported its Q1 2025 earnings, with an earnings per share (EPS) of $1.45, surpassing the forecasted $1.25, although revenue fell slightly short at $2.37 billion against a $2.39 billion expectation. Despite the earnings beat, Celanese’s stock experienced a significant decline, reflecting investor concerns over revenue shortfalls. Analysts from RBC Capital Markets downgraded Celanese’s stock from Outperform to Sector Perform, citing challenges in the automotive market and lowered their EBITDA estimates for Q1 and full-year 2025. RBC also noted Celanese’s high leverage and concerns about the timing of benefits from its acquisition of DuPont (NYSE:DD)’s Mobility & Materials business.
BMO Capital Markets maintained its Underperform rating on Celanese while lowering the price target to $46.00, highlighting macroeconomic headwinds and excess capacity as key risks. Jefferies also adjusted its price target to $55.00, maintaining a Hold rating, despite Celanese’s Q4 earnings surpassing estimates. Jefferies expressed concerns over ongoing automotive supply chain issues affecting future earnings potential. Celanese continues to focus on cash generation and strategic initiatives to address these challenges, including potential divestitures and a focus on high-growth segments like electric vehicles. Investors are closely monitoring these developments as they assess the impact on Celanese’s financial performance and valuation.
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