Deutsche Bank analyst David Begleiter upgraded Celanese Corporation (NYSE:CE) to Buy from Hold, lowering the price forecast to $110 from $135.
Celanese reported third-quarter adjusted earnings per share of $2.44, missing analyst estimates of $2.85. The company reported sales of $2.65 billion, missing analyst estimates of $2.7 billion, according to Benzinga Pro.
The analyst wasn't surprised by Celanese missing third-quarter earnings and lowering fourth-quarter guidance.
For Begleiter, the shortfalls were due to weak demand in automotive, industrial and construction markets, which impacted many chemical companies this earnings season.
Particularly, the 57% fourth-quarter guidance shortfall surprised the analyst, but it was mainly due to temporary facility shutdowns to cut costs and reduce inventory.
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Celanese likely misjudged the auto market, overproducing in the third quarter and creating excess inventory.
Begleiter added this won't affect the company's long-term earnings potential.
The analyst noted the 95% dividend cut should have happened two years ago when Celanese acquired DuPont's Mobility & Materials business for $11 billion.
Now, two years post-acquisition, Celanese is 5x leveraged (4.9x net debt to LTM EBITDA), leaving little margin for error.
The analyst suggested Celanese has strong operating leverage for a recovery, forecasting its EPS will rise from $10.50 in 2025 to over $14.50 by 2026, driven by factors such as interest rate cuts in Western countries, fiscal and monetary stimulus in China and several years of low industrial activity.
CE Price Action: Celanese shares are trading higher by 1.03% to $91.94 at publication Wednesday.
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