On Wednesday, Citi revised its price target for Metso (OTC:MXTOF) OYJ (METSO:FH) (OTC: MXCYY) stock, a company specializing in industrial machinery, to EUR10.80 from EUR11.10, while upholding a Buy rating on the stock. This adjustment comes ahead of the company's third-quarter financial results, set to be released on October 24, 2024.
The stock has experienced underperformance compared to the SXNP index as the market anticipates its upcoming earnings report. Investors are expecting continued volatility and are likely preparing for further order weakness in the Aggregates sector of the construction industry. Additionally, there are concerns that margin expectations may be overly optimistic for both the Aggregates and Minerals segments.
Despite these challenges, Citi has noted some positive developments. According to a recent Global mining survey conducted by the firm, Metso's equipment categories have shown significant momentum compared to previous surveys. This suggests a potential for a more than expected order volume in the Minerals sector.
Analysts have expressed that growth and margin projections for the Aggregates sector may be set too high for 2025, while expectations for the Minerals sector appear to be more accurate. The survey's findings provide further support for the Minerals outlook.
Citi emphasizes the importance of a sustained recovery in the mining sector for Metso's stock performance, which they believe is more critical than another potential shortfall in the Aggregates sector.
Citi also addressed the debate regarding excess inventory levels, suggesting that the concerns about inventory obsolescence and the risks of over-production are overly pessimistic. The firm does not foresee a significant risk in this area and has reiterated its Buy recommendation for Metso OYJ.
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