Celanese Beat Estimates. Guidance Is the Problem

Celanese (CE) topped Wall Street earnings and revenue estimates for the second quarter, but the stock fell as much as 4.5% in Thursday trading. The reason was the company's full-year outlook, which came in below consensus, management said on the earnings call.

Management cited weaker demand in the automotive and construction end markets, along with destocking in the chemicals supply chain. The company now expects adjusted earnings per share of $10.50 to $11.50 for the full year, below the $12.00 analysts had penciled in, according to a Bloomberg poll.

“We're seeing a slower recovery in our key end markets than we anticipated six months ago,” CEO Lori Ryerkerk told analysts on the call. “We are adjusting our production rates accordingly.”

The earnings beat came from cost cuts and a better product mix, not from underlying demand strength, Ryerkerk said. Revenue of $2.68 billion beat the $2.59 billion estimate, but gross margins narrowed 130 basis points year over year.

For the third quarter, Celanese sees EPS of $2.50 to $3.00, well below the $3.45 consensus. The company also slashed its capital expenditure plan for 2025 by $200 million, to $1.1 billion, to preserve cash.

Celanese’s acetyl chain business, which accounts for about 60% of revenue, saw volumes drop 3% sequentially. The engineered materials segment, which serves automotive and electronics, was flat.

The company's net debt stood at $8.4 billion at the end of the quarter, roughly 3.2 times trailing EBITDA. Management said it is prioritizing debt reduction over share buybacks.

Analysts at KeyBanc cut their price target on the stock to $130 from $145, citing the guidance miss. “The company is navigating a demand trough, but the balance sheet is manageable,” analyst Michael Sison wrote in a note. “We see limited upside until volume recovers.”

Celanese shares closed at $117.34, down 3.8%. The stock has lost 12% year to date.