On Thursday, Goldman Sachs (NYSE:GS) analyst Georgina Fraser upgraded Umicore SA (OTC:UMICY) shares, listed on Euronext (EPA:ENX) Brussels (UMI:BB) and over-the-counter (OTC: UMICY), from Sell to Neutral, maintaining a price target of €9.20. Fraser’s assessment indicated that the potential for further significant negative revisions to Umicore (EBR:UMI)’s earnings projections is now more limited. The analyst noted that Umicore’s 12-month forward earnings per share (EPS) estimates have decreased by 62% since August 2021. According to InvestingPro data, the stock currently trades near its 52-week low of $2.13, with analysts projecting a return to profitability this year.
Fraser remarked on the stock’s performance, highlighting that since Umicore was added to the Sell List on March 25, the shares have fallen 59%, in contrast to the FTSE World Europe index, which has risen by 6%. This stark underperformance has been factored into the new rating. InvestingPro data reveals the company maintains a strong free cash flow yield and has consistently paid dividends for 28 consecutive years, despite recent challenges.
The upgrade reflects a shift in perspective based on several factors that could contribute to Umicore’s performance. These include the potential for EU policy support, the possibility of a strategic pivot, sustained strength in the Catalysis division, and increased EU defense spending. These elements represent potential sources of upside risk for the company.
Despite the upgrade, Goldman Sachs has made no changes to their estimates or the price target of €9.20 for Umicore shares. The current price target suggests a 7% upside from the stock’s recent trading levels. The analyst’s comments underscore a belief that the market has already accounted for the considerably negative sentiment surrounding Umicore. InvestingPro analysis indicates the stock is currently undervalued, with additional insights available through their comprehensive financial health scoring system. Subscribers can access over 10 additional ProTips and detailed valuation metrics.
Fraser concluded that the rationale behind the upgrade to Neutral is a more balanced risk/reward outlook for Umicore. This suggests that while challenges remain, the potential for positive developments may offset further downside risks. Recent financial data shows revenue of $15.4 billion in the last twelve months, with analysts forecasting improved profitability metrics for the coming year.
In other recent news, Umicore SA has experienced a shift in analyst sentiment. Kepler Cheuvreux downgraded the company’s stock rating from "Buy" to "Hold" and significantly reduced the price target from EUR 18.00 to EUR 10.50. This adjustment comes after a detailed evaluation of Umicore’s performance, particularly within its Battery Materials division. Analysts highlighted the company’s ten-year annual Total Shareholder Return of -4%, pointing to ongoing challenges in this sector.
Kepler Cheuvreux expressed limited expectations for significant strategic changes in the Battery Materials division, projecting a 5% Return on Capital Employed by 2030. The firm anticipates modest mid-term earnings growth, with an expected adjusted EBITDA Compound Annual Growth Rate of 1% from 2024 to 2026, aligning with consensus views. The downgrade also reflects a substantial 60% decline in Umicore’s share price throughout 2024, which is now considered in the stock’s valuation. The new price target is based on an estimated 6x 2025 Enterprise Value to EBITDA ratio. Kepler Cheuvreux noted that future adjustments to their rating could depend on Umicore’s capital expenditures and growth acceleration.
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