On Tuesday, Deutsche Bank (ETR:DBKGn) adjusted its outlook on Croda International (CRDA:LN) (OTC: COIHY), reducing the price target to GBP43.00 from the previous GBP44.00, while maintaining a Hold rating on the shares. The firm anticipates that second-quarter sales will show a 3% increase at constant currency, following a 10% decline in the first quarter.
This projection is based on the assumption that underlying business dynamics in the second quarter have largely mirrored those of the first, with the exception of some sequential improvement in the Industrial Specialties sector.
The increase in second-quarter sales is expected to be driven by the Consumer Care division, which should offset a decline in the Life Science division. The latter is reportedly struggling due to continued weakness in crop care and de-stocking in the pharmaceutical sector. Despite the forecasted sales growth, Deutsche Bank projects a decline in the first-half operating margin of 2024 for Croda, down 321 basis points to 16.7%.
The anticipated margin contraction is attributed to several factors, including a weaker mix due to stronger growth of lower-margin fragrances and flavors, the absence of a one-off benefit seen in the first half of 2023 from a provision release and Iberchem earnout, lower fixed cost absorption, a return to normal levels of the cost base, and ongoing investments to support the company's long-term strategy, which are expected to lead to higher depreciation.
As a result of these factors, Deutsche Bank expects Croda's underlying operating profit and profit before tax (PBT) for the first half of 2024 to be at £137 million and £127 million respectively. These figures represent a significant decrease of 22% and 27% compared to the same period in the previous year, aligning broadly with the current consensus.
InvestingPro Insights
With Croda International's recent performance under scrutiny, insights from InvestingPro provide a deeper dive into the company's financial health. An InvestingPro Tip highlights that Croda International (OTC: COIHY) has raised its dividend for three consecutive years and has maintained dividend payments for 33 consecutive years, which may be of interest to investors seeking stable dividend income. Additionally, the stock is currently trading near its 52-week low, which could be seen as a potential entry point for value investors.
From a data perspective, Croda's market capitalization stands at $7.25 billion, with a relatively high price-to-earnings (P/E) ratio of 33.81. The company's revenue for the last twelve months as of Q4 2023 was approximately $2.16 billion, which indicates a decline of 18.9% compared to the previous period. Despite the revenue decrease, the gross profit margin remains robust at 43.08%, showcasing the company's ability to maintain profitability. Investors may also note that the dividend yield as of the most recent data is 3.66%, which could be appealing for those looking for income-generating investments.
For more detailed analysis and additional InvestingPro Tips on Croda International, visit InvestingPro. Use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription. There are currently 6 more InvestingPro Tips available, which could help investors make more informed decisions.
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