Celanese Corporation (NYSE:CE) shareholders will have a reason to smile today, with the analysts making substantial upgrades to this year's statutory forecasts. The consensus statutory numbers for both revenue and earnings per share (EPS) increased, with their view clearly much more bullish on the company's business prospects. Investor sentiment seems to be improving too, with the share price up 4.0% to US$154 over the past 7 days. Whether the upgrade is enough to drive the stock price higher is yet to be seen, however.
Following the upgrade, the most recent consensus for Celanese from its 14 analysts is for revenues of US$8.0b in 2021 which, if met, would be a notable 14% increase on its sales over the past 12 months. Statutory earnings per share are supposed to dive 28% to US$15.93 in the same period. Previously, the analysts had been modelling revenues of US$7.1b and earnings per share (EPS) of US$13.10 in 2021. There has definitely been an improvement in perception recently, with the analysts substantially increasing both their earnings and revenue estimates.
Although the analysts have upgraded their earnings estimates, there was no change to the consensus price target of US$180, suggesting that the forecast performance does not have a long term impact on the company's valuation. Fixating on a single price target can be unwise though, since the consensus target is effectively the average of analyst price targets. As a result, some investors like to look at the range of estimates to see if there are any diverging opinions on the company's valuation. The most optimistic Celanese analyst has a price target of US$205 per share, while the most pessimistic values it at US$145. These price targets show that analysts do have some differing views on the business, but the estimates do not vary enough to suggest to us that some are betting on wild success or utter failure.
These estimates are interesting, but it can be useful to paint some more broad strokes when seeing how forecasts compare, both to the Celanese's past performance and to peers in the same industry. The analysts are definitely expecting Celanese's growth to accelerate, with the forecast 30% annualised growth to the end of 2021 ranking favourably alongside historical growth of 2.1% per annum over the past five years. By contrast, our data suggests that other companies (with analyst coverage) in a similar industry are forecast to grow their revenue at 5.3% per year. Factoring in the forecast acceleration in revenue, it's pretty clear that Celanese is expected to grow much faster than its industry.
The Bottom Line
The biggest takeaway for us from these new estimates is that analysts upgraded their earnings per share estimates, with improved earnings power expected for this year. Fortunately, analysts also upgraded their revenue estimates, and our data indicates sales are expected to perform better than the wider market. The lack of change in the price target is puzzling, but with a serious upgrade to this year's earnings expectations, it might be time to take another look at Celanese.
Analysts are clearly in love with Celanese at the moment, but before diving in - you should be aware that we've identified some warning flags with the business, such as a weak balance sheet. For more information, you can click through to our platform to learn more about this and the 3 other risks we've identified .
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