Core Viewpoint - Celanese's recent earnings report shows mixed results, with a notable decline in adjusted earnings and revenues, while the stock has outperformed the S&P 500 in the past month [1][3][4]. Financial Performance - Celanese reported Q2 2025 earnings from continuing operations of $1.90 per share, up from $1.42 in the prior-year quarter, but adjusted earnings fell 39.5% to $1.44 per share from $2.38 a year ago [3]. - Revenues for the quarter were approximately $2.53 billion, a decrease of about 4.5% year over year, but exceeded the Zacks Consensus Estimate of $2.50 billion [4]. - The Engineered Materials unit generated net sales of around $1.44 billion, down 1.7% year over year, while the Acetyl Chain segment posted net sales of approximately $1.12 billion, down 7.2% year over year [5][6]. - Cash and cash equivalents at the end of the quarter were roughly $1.17 billion, up 23.3% sequentially, while long-term debt increased by 2.5% to approximately $12.69 billion [7]. Outlook - The company anticipates a softer demand environment for the second half of the year, which may offset the benefits of cost reduction initiatives [8]. - Adjusted earnings per share for Q3 are projected to be in the range of $1.10 to $1.40, with expectations to generate $700 million to $800 million in free cash flow for 2025 [8]. - There has been a downward trend in estimates, with a consensus estimate shift of -27.14% in the past month [9][12]. Industry Context - Celanese operates within the Zacks Chemical - Specialty industry, where PPG Industries, a peer, reported revenues of $4.2 billion for the last quarter, reflecting a year-over-year decline of 12.5% [13]. - PPG Industries is expected to post earnings of $2.12 per share for the current quarter, indicating a slight year-over-year change of -0.5% [14].

Core Viewpoint - Celanese Corporation's share price dropped significantly following disappointing financial results and ongoing inventory destocking issues, leading to an investigation into potential misleading disclosures to investors [1][4][5]. Financial Performance - On August 12, 2025, Celanese reported Q2 2025 financial results, resulting in a share price decline of $6.20 (-13%) due to ongoing inventory destocking issues [1]. - The company experienced a 54% decline in net cash provided by operations for the nine months ended September 30, 2024, compared to the same period in 2023, attributing this to inventory increases and timing of collections [3]. - Subsequent quarterly reports in February and May 2025 continued to show disappointing results, with significant automotive destocking impacting performance [4]. Investigation Details - Hagens Berman has initiated an investigation into Celanese's disclosures regarding sales practices, inventory reporting, and growth trajectory, particularly in the Engineered Materials segment [2][5]. - The investigation is focused on whether Celanese misled investors about overloading customers with excess inventory [5]. Market Reaction - Following the Q3 2024 results announcement, Celanese shares fell 26% the next day, and further declines were observed after subsequent disappointing quarterly reports [3][4].

Industry Overview - Chemicals companies are currently experiencing challenging times, with a multi-year downturn in the shares of many leading firms [1] - There has been a prolonged period of soft demand across various industrial end markets, contributing to the struggles faced by the chemicals sector [1] Analyst Background - The analyst has a decade of experience as a hedge fund analyst and has conducted extensive on-the-ground research in Latin America, focusing on markets such as Mexico, Colombia, and Chile [2] - The analyst specializes in identifying high-quality compounders and growth stocks at reasonable prices in the US and other developed markets [2]

Core Insights - The materials sector has several oversold stocks, presenting potential buying opportunities for undervalued companies [1][2] Group 1: Oversold Stocks - Celanese Corp has an RSI of 26.6, with a stock price of $41.80, and has fallen approximately 29% over the past month, reaching a 52-week low of $36.29 [8] - Namib Minerals has an RSI of 19.5, with a stock price of $2.93, and has experienced a significant decline of around 66% over the past month, hitting a 52-week low of $2.61 [8] - Intrepid Potash Inc has an RSI of 27.4, with shares closing at $29.01, and has decreased about 17% in the last month, with a 52-week low of $20.86 [8]

Group 1 - The core viewpoint is that Bank of America has lowered the target price for Celanese from $65 to $59 [1]

Financial Data and Key Metrics Changes - The company is targeting a quarterly EPS run rate of $2, which is considered achievable with concrete plans in place [11][15] - Free cash flow generation is prioritized, with a guide of $700 to $800 million for the year, indicating strong operational cash flow despite high interest expenses [21][71] Business Line Data and Key Metrics Changes - In the Engineered Materials segment, there has been a noted weakness in demand, particularly in China and Europe, while the Americas remain stable [8][9] - The Acetyl segment is experiencing a similar trend, with expectations of continued softness in demand for certain products [25][26] Market Data and Key Metrics Changes - The Western Hemisphere is reported to have the lowest acetyl demand in twenty years, impacting overall performance [76] - The company is seeing a shift in customer behavior, with many reducing inventory levels due to uncertainty in demand [85] Company Strategy and Development Direction - The company is focusing on cost structure improvements and executing differentiated business models to enhance profitability [11][15] - There is an emphasis on diversifying the Engineered Materials business beyond automotive applications, targeting sectors like drug delivery and clean energy [96] Management's Comments on Operating Environment and Future Outlook - Management acknowledges the current demand environment is weak but expresses confidence in the company's ability to adapt and capture future opportunities [40][41] - The visibility of order books is currently low, complicating predictions for the fourth quarter [62] Other Important Information - The company is actively pursuing divestitures, with a focus on maximizing profitability and reducing complexity in transactions [105][112] - The MicroMax divestiture process is progressing well, with management expressing confidence in achieving their targets [105] Q&A Session Summary Question: What end markets are seeing weakening demand? - Management noted a pullback in China automotive orders and some weakness in European demand, while the Americas remain stable [8] Question: How does the company plan to achieve the $2 EPS target? - The company has identified controllable actions in cost structure and pricing strategies to reach the target, although it may take longer than initially expected [11][15] Question: Are tariffs affecting the tow business in China? - Management confirmed that the tow business in China is not impacted by tariffs as it operates through joint ventures [30] Question: What is the outlook for the acetic acid business in China? - Management indicated that while the market is challenging, they are not speculating on future capacity rationalization due to anti-involution policies [45] Question: How is the company managing its debt maturities? - The company plans to address debt maturities through free cash flow generation and divestiture proceeds, rather than relying on its revolver [64] Question: What is the impact of inventory reduction initiatives on earnings? - Management explained that inventory reduction efforts are expected to have a sequential negative impact on earnings in the short term but are part of a long-term strategy [19][24] Question: How does the company view the current demand environment? - Management expressed that while the demand environment is weak, they are focused on operational efficiency and preparing for future demand changes [40][41]

Financial Data and Key Metrics Changes - The company is targeting a quarterly EPS run rate of $2, which is considered achievable with concrete plans in place [9][13] - Free cash flow generation is prioritized, with a guide of $700 to $800 million for the year, translating to approximately $7 per share [18][68] - The company reported a sequential negative impact of $25 million in Q3 due to inventory reduction efforts [17][22] Business Line Data and Key Metrics Changes - In the Engineered Materials segment, there has been a noted weakness in demand from China and Europe, while the Americas remained stable [6][7] - The Acetyl segment is expected to see flat performance compared to Q2, with no significant changes anticipated in the near term [98] Market Data and Key Metrics Changes - The company is experiencing the lowest demand levels in the Western Hemisphere for acetyl products in 20 years, with a 5% to 6% decline in volumes compared to the first half of the previous year [72][73] - The visibility of the order book has decreased significantly, with only two weeks of reliable orders in Engineered Materials [58] Company Strategy and Development Direction - The company is focusing on cost structure improvements and executing differentiated business models to achieve its EPS target [9][13] - There is an emphasis on diversifying the Engineered Materials business beyond automotive applications, exploring opportunities in drug delivery, performance footwear, and clean energy [94] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the company's ability to adapt to changing demand and emphasized the importance of cash generation [18][37] - The company is prepared to pivot with demand changes and is actively working on controllable actions to improve profitability [13][39] Other Important Information - The company is undergoing a divestiture process, with the MicroMax project progressing well and expected to yield positive results in the second half of the year [102] - The company has extended its revolver to 2030, ensuring sufficient liquidity to address upcoming maturities [60][62] Q&A Session Summary Question: What end markets are seeing weakening demand? - Management noted a pullback in China automotive orders and some weakness in European demand, while the Americas remained stable [6][7] Question: How does the company plan to achieve the $2 EPS target? - The company has identified four controllable areas to improve cost structure and pricing, which will help reach the target, albeit potentially delayed [9][13] Question: Are tariffs affecting the tow business in China? - Management confirmed that the tow business in China is not impacted by tariffs as it operates through a joint venture [27] Question: What is the outlook for the acetic acid business in China? - Management indicated that the acetic acid business is currently breakeven and is pivoting towards downstream products for better margins [28] Question: How does the company view the current demand environment? - Management described the demand environment as uncertain, with customers reducing inventories, impacting sales [82][84] Question: What is the status of the MicroMax divestiture process? - The MicroMax process is progressing well, with management confident in achieving positive outcomes in the near future [102]

Core Insights - Celanese Corporation reported second-quarter 2025 earnings from continuing operations of $1.90 per share, an increase from $1.42 in the prior-year quarter, while adjusted earnings were $1.44 per share, down 39.5% from $2.38 a year ago, beating the Zacks Consensus Estimate of $1.38 [1][8] - Revenues for the quarter were $2,532 million, a decrease of approximately 4.5% year over year, but exceeded the Zacks Consensus Estimate of $2,496.5 million, attributed to lower pricing and volumes, with prices falling 4% year over year [2][8] Segment Highlights - The Engineered Materials unit reported net sales of $1,442 million, down around 1.7% year over year, surpassing the estimate of $1,368.7 million, with an operating profit of $165 million and adjusted EBIT of $214 million [3] - The Acetyl Chain segment posted net sales of $1,115 million, down roughly 7.2% year over year, beating the estimate of $1,102.2 million, generating an operating profit of $154 million and adjusted EBIT of $196 million [4] Financials - Celanese ended the quarter with cash and cash equivalents of $1,173 million, up approximately 23.3% sequentially, while long-term debt increased by 2.5% sequentially to $12,689 million [5] - Cash provided by operating activities was $410 million, and free cash flow was $311 million in the reported quarter [5] Outlook - The company anticipates a softer demand environment across most key end-markets for the second half of the year, expecting that slowing demand will partly offset the benefits of cost reduction initiatives, with adjusted earnings per share forecasted in the range of $1.10 to $1.40 for the third quarter [6] - Celanese reaffirms its expectation to generate $700 million to $800 million in free cash flow for 2025 [6] Price Performance - Celanese's shares have declined by 27.4% over the past six months, compared to a 2.3% decline in the industry [7]

Q2 2025 Performance - Celanese's Q2 2025 adjusted EPS was $1.44[10] - Acetyl Chain (AC) adjusted EBIT was $196 million[10] - Engineered Materials (EM) adjusted EBIT was $214 million[10] - The company generated $311 million in free cash flow in Q2 2025[10] Q3 2025 Outlook - Celanese anticipates an adjusted EPS guidance of $1.10 to $1.40 for Q3 2025[13] - The company projects an adjusted EBIT for Acetyl Chain between $195 million and $215 million, and for Engineered Materials between $170 million and $190 million[13] Cost Reduction Initiatives - Celanese expects cost reduction initiatives to deliver $120 million in cost savings in 2025[16] - The company identifies future incremental cost reduction opportunities of $50 million - $100 million[16] Free Cash Flow - Celanese is on track to achieve a target of $700 million to $800 million FY2025 free cash flow generation[18] - The company's 1H 2025 free cash flow is higher year-over-year by approximately 80%[18] Acetyl Chain (AC) Business - Approximately 70% of AC revenue in the Western Hemisphere is derived from contracted business in 2024[38] - AC Operating EBITDA margin has consistently been greater than 20% for the past five years[26]

Group 1 - U.S. stock futures are slightly lower, with Dow futures down approximately 0.1% [1] - Celanese Corporation reported second-quarter financial results and provided third-quarter adjusted EPS guidance below market estimates, expecting earnings of $1.10 to $1.40 per share compared to estimates of $1.73 per share [1] - Celanese shares fell 15.5% to $40.00 in pre-market trading following the announcement [1] Group 2 - BigBear.ai Holdings, Inc. experienced a decline of 30.8% to $4.91 in pre-market trading after reporting worse-than-expected second-quarter results and cutting FY25 sales guidance [4] - PubMatic, Inc. shares dropped 28.7% to $7.55 in pre-market trading after issuing Q2 results and Q3 sales guidance below estimates [4] - Fluence Energy, Inc. shares dipped 14.3% to $7.83 in pre-market trading after mixed third-quarter financial results [4] - Archer Aviation Inc. fell 9.9% to $8.60 in pre-market trading due to a wider-than-expected quarterly loss [4] - Microvast Holdings, Inc. shares decreased by 10.2% to $2.72 after reporting disappointing quarterly sales [4] - TAT Technologies Ltd. saw a decline of 7.6% to $34.25 following weak quarterly sales [4]