Celanese (CE) has a strong growth strategy, with growth in Asia as a key factor. There is $400 million of free cash flow per year primarily focused on share repurchasing. With the completion of the 8.5 million share repurchase in July, Celanese is continuing to evaluate additional share repurchases. The company was recently upgraded by S&P with a positive outlook and a corporate credit rating of BB from BB-.
Higher pricing on continued strong global demand for Acetyl Intermediates products, positive currency impacts, growth in Asia supported by the company's new acetic acid unit in Nanjing, China, as well as sales of Industrial Specialties from the acquired Acetate Products Limited are driving the company sales. In addition, the company has leadership positions in oligopolistic markets that have solid fundamentals.
Diluted EPS from continuing operations was $1.39 in 2007, versus $0.47 the previous year. Sales were $1.76 billion, up from $1.43 billion last year, an increase of 23%. For 2007 full year, sales increased by 12% to $6.44 billion. The company raised its 2008 outlook for adjusted EPS to $3.40 - $3.70 from its previous guidance range of $3.35 - $3.65.
The company expects an adjusted tax rate of 26% in 2008. Currently, Celanese is valued at 10.7x our 2008 estimate of $3.72. As a result, we rate the shares a Buy with a target of $43. This is 11.6x our 2008 estimate.
Read the full analyst report on CE.
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