Why Celanese Corporation (NYSE: CE) stock is falling

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Celanese Corporation (NYSE: CE) stock fell 3.2% on 22nd October, 2019 (as of 9:56 am GMT-4; Source: Google finance) after the company posted mixed results for the third quarter of FY 19. Despite no significant improvement in market demand over the second quarter, the Company has delivered sequential growth in both Engineered Materials and the Acetyl Chain through their differentiated business models while again displaying a stable earnings profile in Acetate Tow. The Company has generated operating cash flow of $397 million and free cash flow of $315 million in the third quarter, on the back of continued strength of earnings to cash conversion. In the third quarter, capital expenditures incurred were $82 million.

CE in the third quarter of FY 19 has reported the adjusted earnings per share of $2.53, beating the analysts’ estimates for the adjusted earnings per share of $2.51. The company had reported the adjusted revenue growth of 35.9 percent to $1.59 billion in the third quarter of FY 19, missing the analysts’ estimates for revenue of $1.64 billion expected, according to Refinitiv consensus estimates. The revenue grew as 2 percent sequential volume growth offset the impact of a 1 percent decline in both pricing and foreign exchange.

Celanese has returned $352 million of cash to shareholders in the third quarter through $275 million in share repurchases and $77 million in dividends, bringing the total year-to-date cash returned to $1 billion.

Based on an expectation that market conditions are unlikely to improve in 2019, and including the impacts of the previously announced unplanned Clear Lake outage, the Company expects to post 2019 adjusted earnings in the range of $9.60 and $9.80 per share. The Company expects capital expenditures for 2019 to total approximately $400 million, inclusive of costs to repair the Clear Lake CO unit. The final performance will depend on the evolution of demand conditions and timing of the restart of the Clear Lake CO unit.

For fiscal 2020, the company remains focused on controllable factors including productivity initiatives, business model enhancements, and high-return capital deployment that will post double-digit adjusted earnings per share growth next year, whether or not current demand conditions improve. The company expects fiscal 2020 adjusted earnings to be in the range of $11 to $12 per share, and the higher end of the range achievable if the company experience improvement in demand conditions next year.

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