Celanese Beats Q2 EPS Estimate, Reaffirms EPS FY16 Outlook

Celanese Beats Q2 EPS Estimate, Reaffirms EPS FY16 Outlook
July 28, 2016

 
Aided primarily by lower selling, general and administrative (SGA) expenses, specialty materials company Celanese Corp. (NYSE:CE) managed to post a growth in the fiscal 2016 second-quarter earnings. However, the poor performance of the Acetyl chain segment resulted in an overall year-over-year decline in the revenue. Considering the management’s outlook for fiscal 2016 and improving business conditions in the US, we can expect the share price to remain range bound with a bullish bias in the third-quarter. On Wednesday, the share price of Celanese ended at $65.40 on the NYSE.

The Irving, Texas-based company reported a fiscal 2016 second-quarter earnings of $221 million or $1.50 per share on revenue of $1.35 billion. In the same period last-year, the fortune 500 company reported earnings of $205 million or $1.33 per share on revenue of $1.48 billion. The quarterly revenue was below the analysts’ estimate of $1.42 billion.

The Total Material Solutions segment reported a $5 million y-o-y increase in the revenue to $600 million. On the other hand, Total Acetyl Chain segment revenue declined $128 million to $780 million in the second-quarter of fiscal 2016. During the second-quarter, the SGA expenses were $71 million, compared to $106 million in the Q2 2015.

For the second-quarter ended June 2016, the adjusted earnings from the continuing operations were $234 million or $1.59 per share, compared to $243 million or $1.58 per share in the second-quarter of 2015.
However, the Q2 earnings of the premium paint and coating solutions provider exceeded the Thomson Reuters estimate of $1.54 per share.

The operating cash flow of the company was $349 million, which is the second best performance in the history of the company. Celanese recorded free cash flow of $285 million in the second-quarter. During the quarter, the company’s debt was upgraded by both S&P and Moody’s investor service to BBB- and Baa3 respectively.

The company also confirmed its earnings outlook for fiscal 2016. Celanese anticipates an 8% to 10% increase in the earnings, compared to the full year 2015. Thus, based on the strong fundamentals, we believe that any decline in the share price should be used to take a long position in the stock.

Technically, the support zone for the stock lies between 60 and 62. Considering the sharp fall triggered by a decline in the second-quarter revenue, we can anticipate the share price to re-test the support level. Both the main and signal line of the MACD indicator is above the zero line, thereby indicating the prevailing bullish undercurrent in the scrip.

Celanese - Technical Analysis - 28th July 2016

Thus, purchasing a one touch call option would be the smart choice. Ideally, the strike price for the suggested binary option trade should remain below the next resistance level of 70. Furthermore, it is better to choose an expiry date in the third-week of August.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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