On Friday, RBC Capital Markets adjusted its outlook on Nufarm (OTC:NFRMY) Ltd. (NUF:AU) (OTC: NFRMY) shares, reducing the price target from AUD6.75 to AUD6.25 while retaining an Outperform rating on the stock.
The revision follows Nufarm's announcement of its first-half 2024 financial results, which revealed earnings before interest, taxes, depreciation, and amortization (EBITDA) at $217 million. This figure represents a year-over-year decline of 31% and falls 11% short of both RBC Capital's and the consensus estimates.
The company also declared a dividend of 4 cents per share, which is below the expected 5 cents per share. The performance shortfall was attributed primarily to ongoing difficult market conditions and pricing challenges.
Despite these headwinds, Nufarm managed to achieve some operational successes, including volume and mix gains, a 20% reduction in inventories, and progress in the rollout of seed technologies.
Looking ahead, RBC Capital anticipates a rebound in pricing power beginning in the fiscal year 2025. The firm forecasts a compound annual growth rate (CAGR) for EBITDA of approximately 20% over the next three years.
This optimistic long-term view underpins the Outperform rating, even as the near-term challenges have necessitated a downward adjustment in the price target.
Nufarm's recent performance and the revised expectations from RBC Capital Markets may influence investor sentiment as the market digests the implications of the softer first-half financial results and the company's strategies to navigate the current market dynamics.
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