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On Tuesday, TD Cowen analysts downgraded Calumet Specialty Products Partners stock, moving their recommendation from Buy to Hold. The firm also adjusted the price target downward from $26.00 to $16.00. The downgrade comes amid significant market pressure, with the stock down 13.3% in the past week and nearly 39% year-to-date. The revision reflects immediate challenges faced by the company, particularly concerning its Montana Renewables (MRL) project, as well as broader issues within the industry. According to InvestingPro data, the stock’s RSI indicates oversold territory, suggesting potential for a technical rebound.
According to TD Cowen, these emerging risks are offsetting the potential long-term benefits that Calumet might realize. The analysts pointed out that for the stock to find stability, the company must exhibit competitive earnings, especially from the MRL project. With a weak gross profit margin of 5.5% and negative earnings of -$2.67 per share in the last twelve months, the company faces significant profitability challenges. They also noted that any potential upside for the stock is heavily reliant on the confidence in Sustainable Aviation Fuel (SAF) pricing, which may prove challenging to demonstrate in the near term.
The downgrade reflects a recalibration of expectations as Calumet navigates through a landscape that has become increasingly complex. TD Cowen’s statement emphasizes the need for the company to validate its earnings capability in the face of industry-wide pressures and specific project-related obstacles.
Calumet Specialty Products Partners, which trades on NASDAQ under the ticker (NASDAQ:CLMT), is faced with the task of proving its mettle in the competitive arena, particularly with its MRL project. The firm’s performance and pricing strategy in the SAF market will be closely watched by investors as key indicators of its ability to deliver value and stabilize its stock price in the future.
TD Cowen’s revised price target of $16.00 represents a significant reduction from the previous target of $26.00, setting a new benchmark for Calumet’s market valuation. The broader analyst community maintains targets ranging from $15 to $33, reflecting mixed sentiment about the company’s prospects. The company will need to address the concerns outlined by the analysts to reassure investors and regain momentum in its stock performance. For deeper insights into Calumet’s financial health and detailed analysis, including 14 additional key ProTips, check out the comprehensive research available on InvestingPro.
In other recent news, Calumet Inc. reported disappointing financial results for the fourth quarter of 2024, with earnings per share (EPS) at -$0.47, missing the forecasted -$0.21. Revenue also fell short, coming in at $949.5 million compared to the anticipated $1.01 billion. Despite strong specialty margins of $60 per barrel, the company faced challenges in the renewable diesel market and decreased biomass-based diesel production. Additionally, Calumet secured $782 million in Department of Energy (DOE) loan funding, which is expected to aid in deleveraging and enhancing cash flow. The company recently announced the sale of its Royal Purple Industrial business for $110 million, a move that aligns with its strategy to reduce debt and strengthen its specialty focus. Analysts from firms like Wells Fargo (NYSE:WFC) and TD Cowen have shown interest in the company’s balance sheet restructuring and the impact of new regulations on renewable diesel margins. These developments highlight ongoing efforts by Calumet to optimize its operations and financial standing.
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