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Celanese ($CE) Executives Buy Aggressively Amid 63% Stock Plunge - Bottom Signal or Recovery Bet?

05/28/2025 20:30

Specialty chemicals company Celanese Corporation ($CE) has been experiencing severe stock underperformance, plummeting 63% from $146 in June 2024 to $55 in May 2025, yet multiple executives made significant stock purchases in March, drawing investor attention. This cluster of insider buying occurred during the company's worst crisis period, including removal from the S&P 500 and a 95% dividend cut, making these purchases particularly noteworthy. According to SEC Form 4 filings on March 7, Officer Mark Christopher Murray purchased 2,353 shares at $54.45 per share for $128,109. On the same day, Director Ganesh Moorthy bought 1,000 shares for $54,670, Director Scott McDougald Sutton acquired 7,450 shares for $407,118, and Director Deborah J. Kissire purchased 1,000 shares for $54,280. Notably, Moorthy made consecutive purchases, buying an additional 1,000 shares on March 12. In May, Mark Murray made another purchase of 1,479 shares. All transactions were executed under Rule 10b5-1 trading plans. These executive purchases stand in stark contrast to Celanese's unprecedented crisis. In June 2024, the company declared force majeure on Western Hemisphere acetic acid and vinyl acetate monomer (VAM) products due to supplier operational failures, estimating a 15-20% production impact for Q2 in the U.S. Gulf Coast. By August, sluggish demand and production snags forced the company to cut its 2024 profit forecast to $10.25-$10.75 per share, with Q2 adjusted profit of $2.38 per share missing estimates. The crisis peaked in November when Celanese reported Q3 net earnings plummeted 87% year-over-year to $120 million, primarily due to slowdowns in automotive and industrial segments. The company slashed its quarterly dividend by 95% and implemented cost-cutting plans, sending shares down 14%. Q4 adjusted profit forecast of $1.25 per share fell significantly below analyst expectations. In December, CEO Lori Ryerkerk announced her year-end resignation, with COO Scott Richardson taking over as CEO on January 1, 2025. Adversity continued into 2025. In March, S&P Dow Jones Indices announced that DoorDash, TKO Group Holdings, Williams-Sonoma, and Expand Energy would replace Borgwarner, Teleflex, Celanese, and FMC in the S&P 500 index. Celanese's removal from the S&P 500 reflected its stock underperformance and shrinking market capitalization, shocking investors. April brought additional challenges from President Trump's tariff policies affecting the entire chemical sector. The announcement of a 10% baseline tariff on U.S. imports and higher duties on several countries including China raised concerns about reduced demand for chemical products. When China announced 34% additional tariffs on U.S. imports on April 4, Celanese shares fell 9.7%. In 2024, China represented 7% of U.S. exports, with chemicals comprising 18% of this total value. Headquartered in Irving, Texas, Celanese is a global specialty chemicals company founded in 1912, employing approximately 11,000 people worldwide. The company operates through two main segments: Engineered Materials (nylon, polypropylene compounds, high-temperature nylons, POM, etc.) and Acetyl Chain (acetic acid, VAM, EVA resins, etc.), serving diverse industries including automotive, medical devices, electronics, packaging, and pharmaceuticals. Recent financial performance reflects the company's struggles. Q1 2025 revenue declined 8.5% year-over-year to $2.39 billion. Adjusted earnings per share of $0.57 beat analyst estimates of $0.37 by 54% but represented a significant decrease from $2.08 in the prior year. Trailing twelve months (TTM) net loss reached $1.65 billion, with a debt-to-equity ratio of 234%. However, cash on hand remains solid at $951 million, maintaining adequate liquidity. The broader chemical industry faces similar headwinds. Manufacturing activity contraction in China and the eurozone, high energy costs, and demand softness are weighing on the sector. In Europe, the EU's green initiatives are imposing annual costs exceeding $20 billion on chemical companies, according to the European Chemical Industry Council (CEFIC). Major players like Dow and LyondellBasell are reevaluating operations due to declining demand and increasing regulatory pressures. Despite challenges, recent positive signals have emerged. On May 12, when the U.S. and China announced easing of some tariff measures, chemical stocks rallied across the board. Since China is a major importer of U.S. chemicals, tariff reductions benefited companies including Dow (up 7%), DuPont (up 4.9%), and Celanese (up 6.8%). On April 9, Trump's announcement of a 90-day tariff pause also sent Celanese surging 17.3%. The company continues restructuring and innovation efforts. Celanese is pursuing approximately $1 billion through divestitures like the Micromax electronics business over the next 2.5 years to reduce debt and improve cash flow. Strategic collaborations include working with Li Auto to develop ultra-low emission materials for new energy vehicles and partnering with Dunn-Edwards for carbon capture-based paint technology. The engineered materials segment has implemented price increases to improve profitability. BMO Capital Markets recently upgraded Celanese from "Underperform" to "Market Perform" with a $55 price target. Current analyst consensus shows a median 12-month price target of $52, close to recent trading levels. Of 21 brokerages, 15 recommend "hold" or higher ratings. The executive cluster buying carries multiple interpretations. First, it signals management's belief that current stock prices are excessively undervalued. Second, it demonstrates internal confidence that restructuring and cost-cutting efforts will yield visible results. Third, it suggests a positive outlook on the chemical sector's recovery potential as tariff policy uncertainties ease. Key factors to watch include the Q2 earnings release scheduled for late July to early August. Investors will scrutinize restructuring benefits, price increase effectiveness, and positive impacts from U.S.-China tariff easing. Progress on planned asset sales and debt reduction pace will also be critical variables. Industry-wide demand recovery timing and energy cost stabilization will directly influence Celanese's performance recovery prospects.

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