On Tuesday, Scotiabank reiterated its Sector Outperform rating on shares of Methanex (NASDAQ:MEOH) Corporation, with a steady price target of $60.00. The firm highlighted that methanol prices have experienced a slight uptick across major markets, with the weighted average methanol spot price reaching approximately $337 per metric ton. Methanex has consistently achieved prices $26 above the spot rate, suggesting a potential average selling price of $363 per metric ton.
The current consensus among analysts for Methanex's quarterly performance anticipates average methanol prices of $357, $350, and $355 per metric ton throughout the third quarter, fourth quarter, and into 2025, respectively. However, if the spot prices remain stable and Methanex continues to command a premium over these spot rates, there may be room for upward revisions in these forecasts.
In terms of valuation, using an estimated average selling price of $363 per metric ton and the expected output for New Zealand at 975k metric tons, Scotiabank projects an EBITDA of around $1,007 million, which surpasses the consensus estimate of $960 million.
Moreover, the free cash flow (FCF) per share could reach $6.95, implying a yield of 15%. This projection is particularly noteworthy considering that, following minimal debt repayments in the fourth quarter, Methanex is likely to redirect the majority of its free cash flow towards shareholder returns, potentially through buybacks.
Scotiabank's outlook remains positive for Methanex, emphasizing the onset of "cash harvesting" as the company prepares to potentially increase shareholder value.
In other recent news, Methanex Corporation has seen several significant developments. Scotiabank has maintained its Sector Outperform rating on the company, raising its target price to $60.00 from the previous $58.00. This adjustment reflects a positive outlook on the methanol markets, despite some global demand weaknesses. The firm also highlighted Methanex's potential free cash flow, estimating it at $6 per share for the year 2025.
RBC Capital maintained its Sector Perform rating for Methanex, with a steady price target of $55.00. This decision is based on the updated financial model incorporating the latest reference prices for Methanex and the most recent methanol price forecast by Chemical Market Analytics.
Methanex announced a temporary shutdown of its Egypt methanol production facility due to reduced gas supply. The company is actively engaging with its partner and gas supplier to restore operations.
Furthermore, the company's G3 operations are expected to start without any issues, as per company confidence. Lastly, a potential increase in gas availability in Chile could boost operational rates. These are the recent developments involving Methanex Corporation.
InvestingPro Insights
As Methanex Corporation navigates the methanol market, recent insights from InvestingPro suggest a nuanced picture for investors. With six analysts revising their earnings downwards for the upcoming period, caution may be warranted. Nonetheless, Methanex's valuation implies a strong free cash flow yield, aligning with Scotiabank's projection of a significant free cash flow per share and the potential for enhanced shareholder returns. The company's stock price movements have been quite volatile, which is an important consideration for investors seeking stability.
On the financial metrics front, Methanex boasts a market capitalization of $3.05 billion and a price-to-earnings (P/E) ratio of 20.93, based on the last twelve months as of Q2 2024. While revenue has seen a dip of approximately 9.91% over the same period, the company has maintained dividend payments for 23 consecutive years, currently offering a dividend yield of 1.58%. These figures underscore Methanex's commitment to returning value to shareholders amidst market fluctuations.
For those interested in a deeper dive into Methanex's financial health and future prospects, InvestingPro offers additional tips and metrics, available at InvestingPro.
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