On Thursday, Umicore SA (UMI:BB) (OTC: OTC:UMICY) experienced a downgrade in its stock rating from Hold to Sell by CFRA, accompanied by a significant decrease in its price target from EUR23.00 to EUR14.00. The revision comes as a reaction to the company's recent financial update, which has prompted a reassessment of Umicore's valuation and future earnings potential.
The new price target suggests a forward P/E ratio of 9.7 times and an EV/EBITDA multiple of 5 times for the year 2024. These figures represent a notable departure from the company's two-year average multiples of approximately 15 times and 8 times for P/E and EV/EBITDA, respectively. The firm's decision to adjust its outlook is based on Umicore's latest guidance and performance indicators, especially concerning its electric vehicle (EV)-related businesses.
Umicore has recently adjusted its earnings estimates for 2024 and 2025, with expected earnings per share (EPS) now set at EUR1.45 and EUR1.50, down from previous estimates of EUR1.70 and EUR1.75. This revision follows the company's announcement of a slower-than-anticipated growth in EV demand, which has directly impacted the demand for its Battery Materials segment.
The company's updated EBITDA guidance for 2024 reflects the challenges faced by the Battery Materials business. Umicore anticipates this segment to achieve an adjusted EBITDA that will merely break even, taking into account a positive one-off effect of EUR50 million. This forecast is a stark contrast to the initial EBITDA contribution estimate of EUR135 million.
Consequently, Umicore's expected Group adjusted EBITDA for the full year 2024 has been adjusted to a range of EUR760 million to EUR800 million, a decrease from the previously forecasted range of EUR900 million to EUR950 million.
In other recent news, Umicore SA has been the subject of significant analyst attention. Goldman Sachs (NYSE:GS) recently reduced the company's price target to €14.40 from €19.00, maintaining a Sell rating. Reasons for the downgrade include the increasing presence of LFP batteries in the market and uncertainty about Umicore's European customers' ramp-up. The firm also highlighted valuation concerns, pointing out that Umicore appears expensive when trading at 6.4 times its estimated 2025 EBITDA.
In another development, Citi downgraded Umicore from Buy to Neutral, drastically reducing the stock price target to €22.00 from €40.00. This followed the unexpected resignation of Umicore's CEO and Chief Strategy Officer, leading to doubts about the firm's future direction. The departure of these top executives and the current slowdown in the electric vehicle market were cited as reasons for the downgrade.
These are some of the recent developments affecting Umicore. The company is currently facing multiple challenges, including market concerns, executive departures, and uncertainty in its strategic direction. These factors have contributed to the recent analyst downgrades and price target reductions.
InvestingPro Insights
In light of Umicore SA's stock downgrade and the revised financial outlook, investors may find the real-time data and InvestingPro Tips particularly valuable for making informed decisions. Umicore's market capitalization stands at $3.71 billion, with a P/E ratio of 9.07, reflecting a more modest valuation in comparison to historical averages.
The company's revenue for the last twelve months as of Q4 2023 was $20.18 billion, a significant decrease of 28.17%, indicating the challenges faced in its operations, particularly in the Battery Materials segment as EV demand growth has slowed.
One of the InvestingPro Tips suggests that Umicore's stock is currently in oversold territory according to the RSI, which could be of interest to contrarian investors or those looking for potential rebound opportunities. Moreover, the company has maintained dividend payments for 27 consecutive years, with a current dividend yield of 5.54%, which may appeal to income-focused investors, especially when considering the stock is trading near its 52-week low.
For those seeking a deeper analysis, there are additional InvestingPro Tips available, including insights on sales decline expectations for the current year and the company's gross profit margins. Subscribers can access these tips and more by visiting https://www.investing.com/pro/UMICY. To enrich your investment strategy further, use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, and discover the full range of expert insights and tips offered by InvestingPro.
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