Maintaining $160 FVE as Celanese Reports Fourth-Quarter Results

After updating our model to incorporate Celanese’s CE fourth-quarter results, we maintain our $160 per share fair value estimate. Our narrow moat rating is also unchanged.

Although management guided to a lower outlook in 2023 than the initial view presented during the company’s third quarter earnings call, the midpoint of adjusted EPS guidance was slightly above the consensus mean based on PitchBook data. As such, the market reacted positively to the outlook, with shares up 2% at the time of writing on a day when the broader market is down 1.5%.

However, at current prices, we view Celanese shares as undervalued, with the stock trading more than 25% below our fair value estimate and in 4-star territory. As a result, we view current prices as a good entry point for long-term investors to pick up shares of the high-quality specialty chemicals producer.

In our view, an economic slowdown in 2023 will represent a cyclical bottom for Celanese’s earnings, after reaching a peak in 2021. Thereafter, we expect Celanese will be well positioned to generate strong results driven by volume growth for its downstream engineered materials as the company integrates the recently acquired DuPont mobility and materials business. As global auto builds recover and electric vehicle adoption grows, Celanese is well-positioned to see long-term profit growth.

We have also updated our Morningstar Uncertainty Rating for Celanese to High from Medium. The change is to reflect a wide range of outcomes due to Celanese’s elevated debt levels and the continued volatility of energy prices. This can greatly affect the company’s more-commoditized acetyl chain business.