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On Wednesday, Citi reaffirmed its Neutral stance on BASF SE (BAS:GR) (OTC: OTC:BASFY) shares, maintaining a price target of EUR51.00. The chemicals giant, with a market capitalization of $46 billion and annual revenue of $67.6 billion, has shown resilience despite market challenges. According to InvestingPro analysis, the stock is currently trading near its Fair Value, with several positive indicators including a 34-year track record of consistent dividend payments. The research firm’s analyst, Sebastian Satz, noted that BASF appears poised for a stronger first quarter compared to its industry peers, based on recent spreads indicating net pricing that surpasses the firm’s projections. This assessment could suggest a relatively conservative outlook from the company, especially if BASF achieves its +3% volume growth target. Citi currently forecasts a +2% volume increase for BASF, but acknowledges the potential for greater upside if the +3% target is met. InvestingPro data reveals that net income is expected to grow this year, with the company maintaining a healthy gross profit margin of 26.2%.
Satz further explained that while there is potential for more significant gains with companies like Arkema (EPA:AKE) or Evonik, which Citi rates as Buy, the new 2025E EBITDA estimate for BASF stands at €8.3 billion. This figure is 2% below the consensus and translates to a valuation of 7.5 times earnings before interest, taxes, depreciation, and amortization (EBITDA), which, in Citi’s view, no longer represents a clear undervaluation.
The possibility of a deal in the Coatings segment could offer some benefit to BASF’s valuation, yet the analyst expressed caution due to the company’s current leverage and the ongoing high level of macroeconomic uncertainty. Consequently, Citi does not anticipate that any potential proceeds from such a deal would be distributed to shareholders. The analysis reflects Citi’s position on BASF’s stock as the market continues to navigate through uncertain economic conditions.
In other recent news, BASF SE announced the sale of its Brazilian decorative paints division for $1.15 billion, exceeding initial estimates. The company plans to continue exploring strategic options for its Coatings assets, valued over €5 billion, with full-year results expected soon. Citi analysts have reinstated coverage of BASF with a Neutral rating and a price target of EUR51.00, while expressing concerns that BASF’s free cash flow guidance may fall short of market expectations. Meanwhile, Berenberg analysts downgraded BASF from Buy to Hold, raising the price target slightly to EUR52.00, citing recent share price increases. Despite potential challenges, Berenberg had previously maintained a Buy rating with a target of EUR50.00, noting improved short-term earnings prospects due to Chinese stimulus measures and better plant utilization in Europe. BASF’s strategic moves, including potential divestitures in its Coatings unit, continue to be a point of interest for investors. Additionally, BASF’s investment in Harbour Energy could see strategic developments as a lock-up period for its stake ends in the first half of 2025. These developments reflect ongoing adjustments in BASF’s strategic and financial planning.
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