Celanese (CE – Analyst Report) recently delivered a solid “beat and raise”, driven by expanding profit margins. This prompted analysts to revise their earnings estimates significantly higher for both 2015 and 2016, sending the stock to a Zacks Rank #1 (Strong Buy).

The valuation picture looks attractive too with shares trading at just 11x forward earnings.

Celanese Corporation produces specialty materials and chemical products which are used in most major industries and consumer applications. It is one of the world’s largest producers of acetyl products, which are intermediate chemicals for nearly all major industries. Celanese is also a leading producer of high performance engineered polymers, which are used in various high-value applications.

The company has a large and diverse customer base, with sales approximately equally divided between North America, Europe and Asia.

Third Quarter Results

Celanese reported solid third quarter results on October 19. Adjusted earnings per share came in at $1.50, beating the Zacks Consensus Estimate of $1.38.

Net sales actually fell 20% to $1.413 billion, missing the consensus. However, approximately six percentage points (p.p.) of this decline was due to foreign currency headwinds from the strong dollar. Lower prices contributed 10 p.p. while volume contributed 5 p.p.

Nonetheless, profit margins improved as the segment income margin expanded 150 basis points to Q3 record of 21.6%. This was driven in large part by record margin in the ‘Materials Solutions’ segment, along with productivity improvements across the company. This more than offset lower profits in the ‘Acetyl Chain’ segment due to higher methanol costs. It’s worth noting, too, that Celanese completed construction and began methanol production at a joint venture in Clear Lake, Texas in October.

Estimates Rising

Following solid Q3 results, management increased its full year earnings guidance. The company now expects to earn between $5.90 and $6.10 per share. This prompted a flurry of positive estimate revisions from analysts for both 2015 and 2016. The increase in consensus estimates was strong enough to send the stock to a Zacks Rank #1 (Strong Buy).