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Will Celanese Meet 3Q17 Earnings Expectations?

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Part 3
Will Celanese Meet 3Q17 Earnings Expectations? PART 3 OF 5

What Could Drive Celanese’s Adjusted Earnings per Share in 3Q17?

Analysts’ EPS expectations in 3Q17

As of October 9, 2017, analysts are expecting Celanese (CE) to post adjusted earnings per share of $1.93 in 3Q17, an increase of 15.6% on a year-over-year basis. In 3Q16, Celanese posted adjusted earnings per share of $1.67.

What Could Drive Celanese&#8217;s Adjusted Earnings per Share in 3Q17?

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Driving factors

Celanese expected growth in adjusted earnings per share could be driven by productivity savings. Analysts have forecasted a reduction in the cost of goods sold (or COGS) as a percentage of expected sales. For 3Q17, CE is projected to report COGS of approximately $1.10 billion, representing 72.7% of the expected revenues. In 3Q16, CE reported COGS of $968 million, representing 73.2% of the revenue, a decrease of 60 basis points.

Similarly, analysts foresee a drop in CE’s selling, general, and administrative (or SG&A) expenses as a percentage of expected sales. For 3Q17, CE’s SG&A expense is expected to be at $89.1 million, representing 6.0% of the expected sales. In 3Q16, CE’s SG&A expenses stood at $81 million, representing 6.1% of the sales, a decrease of ten basis points on a year-over-year basis.

Share repurchases

In 2Q17, CE announced a new $1.5 billion share repurchase program. During 2Q17, CE bought back $172 million worth of shares, which is approximately 1.9 million shares. In 3Q16, 144.60 million shares were outstanding, and for 3Q17, analysts expect the number of outstanding shares to be at 137.9 million. It remains to be seen how many shares CE bought back in 3Q17. This figure could boost CE’s earnings per share.

Investors looking for indirect exposure to Celanese can invest in the iShares U.S. Basic Materials ETF (IYM), which invests 2.4% of its portfolio in Celanese. IYM also provides exposure to Monsanto (MON), Praxair (PX), and Air Products and Chemicals (APD), which have weights of 8.6%, 6.6%, and 5.5%, respectively, as of October 9, 2017.

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