On Friday, Jefferies adjusted its stance on Lanxess AG (ETR:LXSG) (LXS:GR) (OTC: LNXSF), shifting the chemical company's stock rating from Hold to Underperform. The firm also revised its price target for the stock, lowering it to EUR 22.00 from the previous target of EUR 24.00.
The downgrade was prompted by a reassessment of Lanxess's financial forecasts, with Jefferies cutting the average EBITDA expectations by 4% for the fiscal year 2024 and by 23% below consensus for fiscal year 2025. The analyst cited concerns over the sustainability of early signs of demand recovery for Lanxess products, which have not been assumed in the firm's coverage.
The analyst's statement highlighted the financial risks associated with Lanxess, stating that the required record high seasonality in the second half of the year is not factored into their coverage. This situation could imply a higher financial risk for the company.
Jefferies also pointed out the leverage concerns, forecasting a net debt to EBITDA ratio, including pensions, of 5.3 times, with limited reduction outside of divestments. The revised price target reflects the firm's cautious stance on Lanxess's financial health and market position.
InvestingPro Insights
In light of Jefferies' recent downgrade of Lanxess AG, real-time data from InvestingPro provides additional context for investors considering the chemical company's stock. With a market capitalization of $2.47 billion and a price-to-earnings (P/E) ratio of 5.85, Lanxess presents a mixed financial picture. Notably, the company's revenue has seen a decline of 20.28% over the last twelve months as of Q1 2024. Despite this, Lanxess has maintained dividend payments for 18 consecutive years, which may be of interest to income-focused investors.
InvestingPro Tips suggest that Lanxess's net income is expected to grow this year, and the company's valuation implies a strong free cash flow yield. These factors could indicate potential for future financial improvement. However, it's important to note that the stock price movements have been quite volatile, which may affect investment decisions. For those who prioritize liquidity, Lanxess's liquid assets exceed its short-term obligations, providing some financial flexibility.
For investors seeking a deeper dive into Lanxess's financial health and future prospects, additional InvestingPro Tips are available. There are currently 6 more tips listed on InvestingPro for Lanxess AG, which can be accessed at https://www.investing.com/pro/LNXSF. To enrich your investment analysis, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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