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On Friday, Citi analysts lifted the price target for Heidelberg (ETR:HDDG) Materials AG (HEI:GR) (OTC: HDELY) to €145.00 from €135.00 while keeping a Neutral stock rating. The adjustment reflects the company’s potential for operating profit growth, despite some uncertainties.
During a conference call, Heidelberg Materials management suggested that their 2025 operating profit guidance of €3.25-3.55 billion might be conservative. The company outlined several factors that could contribute to operating profit (OP) growth. These include the Transformation Accelerator program, which is expected to deliver €150 million in savings by 2025, part of a broader €500 million savings target by the end of 2026, before inflation adjustments.
Additionally, the company is exploring mergers and acquisitions opportunities, such as the pending closure of Giant Cement, which could contribute to operating profit, albeit below a hundred million. Heidelberg Materials also noted the potential recovery in volume, after nearly €1 billion in aggregate operating profit was lost in recent years due to volume deterioration.
The introduction of the company’s Net Zero product evoZero, which has not yet been factored into the guidance, is another area of potential growth. The group’s volume showed a near-flat trend in the fourth quarter of 2024, with a €7 million impact at the operating profit level. However, this could turn positive as early as the first quarter of 2025.
With the new information and potential levers for growth, Citi analysts have opted to raise the target price to €145 while maintaining a Neutral stance on the stock. This move indicates a belief in the company’s ability to achieve its financial targets and possibly exceed them, although Citi remains cautiously optimistic given the uncertainties involved.
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