EU and US could reach trade deal this weekend - Reuters
On Monday, CFRA analyst Jeff Wong downgraded shares of Norsk Hydro ASA (NHY:NO) (OTC: OTC:NHYDY) from Hold to Sell, significantly reducing the price target to NOK50.00 from the previous NOK73.00. Wong cited a downward revision in the company’s financial forecasts and challenging market conditions for the downgrade. According to InvestingPro data, three analysts have recently revised their earnings estimates downward for the upcoming period, reflecting growing concerns about the $10.59 billion market cap metals and mining company.
In his report, Wong adjusted the 12-month target price for Norsk Hydro based on a 2025 EV/EBITDA multiple of 5.0x, which aligns with the company’s five-year average. He also revised the earnings per share (EPS) estimates downward to NOK4.10 from NOK6.26 for 2025 and to NOK4.61 from NOK6.61 for 2026. The analyst’s reassessment follows the company’s own revision of its Extrusions segment’s EBITDA targets, which are now anticipated to be between NOK3.5 billion and NOK4.0 billion, down from the previously expected NOK4.5 billion to NOK5.5 billion. Despite these challenges, InvestingPro data shows the company maintains strong fundamentals with a 10.67% revenue growth over the last twelve months and a solid dividend yield of 2.69%.
Wong pointed to persistent weakness in downstream demand as a key factor for the reduced financial targets. However, he emphasized that the more pressing concern for Norsk Hydro’s outlook is the deteriorating market conditions in its upstream operations. Increased global capacity and improved availability of bauxite have led to a significant drop in alumina prices, which are currently below USD 400 per metric ton.
The analyst also referenced the impressive performance of the Bauxite & Aluminum segment in 2024, where EBITDA surged nearly sixfold due to a rise in PAX prices from below USD 400 per metric ton to a peak of USD 805 per metric ton in December 2024. Without the support of high alumina prices, Wong anticipates substantial earnings headwinds for Norsk Hydro in 2025. Additionally, he noted that tariff risks add to the uncertain outlook for the company.
In other recent news, Goldman Sachs has downgraded Norsk Hydro SA from ’Buy’ to ’Neutral’, with analyst Matt Greene adjusting the price target from NOK78.00 to NOK66.00. This change is based on revised alumina price forecasts, expecting increased supply from China and eased seaborne bauxite constraints. Norsk Hydro has hedged about 20% of its aluminum at $2400 per tonne for 2025, but the feedstock cost for these hedges is higher than current spot prices, suggesting a potential downside to future earnings estimates. Additionally, macroeconomic uncertainties in the downstream automotive sector could delay recovery in key markets, affecting investment plans in that division. Greene also mentioned the strategic importance of Norsk Hydro’s secondary aluminum operations amidst ongoing export controls and trade tensions. However, the anticipated recovery in margins and volumes in the downstream segment may take longer than expected. Near-term risks to European metal premiums have surfaced due to redirected flows from Canada in response to tariffs, potentially impacting pricing. The situation might improve if trade exemptions are granted.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.