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On Thursday, BMO Capital Markets updated its outlook on Methanex (TSX:MX) Corporation (NASDAQ:MEOH), a leading producer and supplier of methanol. Analysts at the firm increased the price target on the company’s shares from $60.00 to $65.00, maintaining an Outperform rating. The adjustment reflects a positive view of the company’s operational performance and future cash flow projections. Currently trading at $51.60, the stock has shown strong momentum, up 11.5% over the past year. According to InvestingPro analysis, Methanex appears undervalued based on its comprehensive Fair Value calculation.
The BMO Capital analyst highlighted several factors contributing to the optimistic assessment. The global methanol market is currently tight, which supports Methanex’s business. Additionally, the recent acquisition of OCI’s methanol and ammonia assets is expected to be accretive to Methanex’s financials. Analysts have observed rising consensus estimates and note that Methanex is operating effectively, despite facing deteriorated gas conditions in New Zealand. The company maintains strong financial health with a current ratio of 2.62, indicating ample liquidity to meet short-term obligations.
Methanex’s financial estimates for 2025 remain largely unchanged, with minor adjustments. BMO Capital now forecasts that the company’s post-acquisition free cash flow (FCF) could be approximately $10 per share, an increase from the previous estimate of around $9 per share. This is based on the assumption that methanol prices will decrease from the current spot price of around $400 per ton to a mid-cycle average of approximately $350 per ton. The company already demonstrates strong cash generation with a 16% free cash flow yield. InvestingPro subscribers can access 10 additional key insights about Methanex’s financial outlook and market position.
The price target of $65 is derived from a valuation of approximately 7 times the projected 2026 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). This projection is based on a full year of financials that include the OCI assets, with the assumption that average selling prices for methanol will moderate to about $350 per ton.
Methanex Corporation, headquartered in Vancouver, Canada, is a global enterprise with a production network spread across several continents. The company’s methanol is used in various products, including energy applications, solvents, and plastics. Methanex’s stock performance and financial health are closely watched by investors interested in the chemical sector and the broader industrial market. The company has maintained dividend payments for 23 consecutive years, currently offering a 1.48% yield. For detailed analysis and comprehensive insights, investors can access the full Pro Research Report available on InvestingPro, which covers all crucial aspects of Methanex’s business model and growth prospects.
In other recent news, Methanex Corporation reported stable third-quarter financial results, with an adjusted EBITDA of $216 million and an adjusted net income of $1.21 per share. RBC Capital maintained its Sector Perform rating on Methanex shares, while Piper Sandler increased the company’s stock price target from $68.00 to $71.00, maintaining an Overweight rating. These ratings reflect recent adjustments in methanol prices, the company’s strategic sales shift towards higher-priced regions, and the anticipated impact of the OCI N.V. assets acquisition.
Methanex’s strategic plans include operating a single plant in New Zealand due to gas supply constraints and focusing on debt management related to the pending OCI transaction. The company has secured a 70% hedge on gas for Geismar at current spot prices and extended gas contracts in South America. The company’s production for 2025 is anticipated to be between 1.3 and 1.4 million tons.
RBC Capital and Piper Sandler’s assessments consider Methanex’s ongoing efforts to improve its financial position, potential earnings growth due to strategic shifts, and external economic factors that could impact the company’s performance. These recent developments provide valuable insights for investors monitoring Methanex’s progress and financial trajectory.
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