Index falls as earnings results weigh; pound above $1.33, Bodycote soars
On Friday, Berenberg analysts downgraded Lanxess AG (ETR:LXSG) (LXS:GR) (OTC: LNXSF) stock rating from Buy to Hold, adjusting the price target to EUR31.00. The revision comes as the shares experienced a significant rally, with year-to-date returns of nearly 19% according to InvestingPro data. This performance was attributed to several key factors including a better-than-expected pre-released Q4 performance, the potential for peace in Ukraine which could lead to lower energy costs, and a favorable outcome in the German election.
The analysts have recognized Lanxess as a long-term investment opportunity, acknowledging that a fundamental valuation case for the company’s shares is still viable. InvestingPro data shows the stock trading at a price-to-book ratio of 0.58, with a current ratio of 1.96 indicating strong liquidity. Nonetheless, they have expressed caution due to the current market conditions. The stock’s recent surge has been driven by optimism that has outpaced that of its less-levered industry peers, largely due to its high level of indebtedness, with a debt-to-capital ratio of 0.54.
The analysts pointed out that while the stock has already incorporated many positive developments, the industrial demand outlook for 2025 remains uncertain. According to InvestingPro analysis, which offers 10+ additional exclusive insights for subscribers, net income is expected to grow this year despite current challenges. Additionally, they noted that gas prices are still elevated and there’s a lack of clarity regarding the impact of any potential Ukraine peace agreement on energy costs. These factors have led to the decision to downgrade Lanxess stock rating to Hold until more concrete cyclical data emerges to suggest a new phase of cyclical recovery.
Lanxess AG, a specialty chemicals company, has been closely monitored by investors due to the volatile nature of the industry and external factors that significantly impact its performance. The company’s financial leverage has made its stock more sensitive to market news and geopolitical events, which can lead to pronounced swings in its share price.
The downgrade serves as a signal to investors that while the company’s fundamentals may be sound, current market dynamics and external uncertainties warrant a more cautious investment stance. Berenberg’s new price target of EUR31.00 reflects a recalibration of expectations in light of these factors.
In other recent news, Lanxess AG has seen its stock rating upgraded by CFRA from Sell to Hold, with the price target adjusted to EUR30.00, up from EUR20.00. This change comes as Lanxess announces that it expects its fourth-quarter 2024 earnings to surpass market expectations, largely due to increased pre-buying activities by U.S. customers. The company forecasts its full-year 2024 EBITDA to be 20% higher than the previous year, placing it at the upper end of its guidance range. For the fourth quarter of 2024, Lanxess projects its EBITDA will be 22% above consensus expectations. Despite these positive developments, the company has noted that macroeconomic conditions heading into 2025 remain challenging. CFRA’s decision to upgrade the stock reflects a neutral stance, as they continue to evaluate the impact of advance purchases on future performance. Additionally, CFRA has revised its earnings per share estimates for Lanxess, increasing the 2024 EPS forecast to EUR1.00 from EUR0.90, while decreasing the 2025 EPS projection to EUR1.60 from EUR1.90. The new price target is based on a 2025 EV/EBITDA multiple of 7.6 times, slightly above Lanxess’s historical average.
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