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On Wednesday, Citi analyst Ephrem Ravi increased the price target on Svenska Cellulosa Aktiebolaget SCA (SCAB:SS) (OTC: SVCBF) to SEK167 from the previous SEK150, while keeping a Neutral rating on the stock. The adjustment came as SCA shares experienced a 3% rise, despite reporting a slight miss on spot forest prices, which fell 13% year-over-year compared to a three-year average decline of 2%.
Ravi noted that the market sentiment was possibly buoyed by SCA’s announcement of a containerboard price increase, marking the first indication of a price inflection following four months of consecutive declines. The analyst also pointed out that SCA’s commentary on reduced capital expenditures might be viewed favorably, considering the company’s history of significant project spending in recent years.
While the Wood and Renewable Energy segments show continued weakness with no immediate signs of recovery, the Pulp and Containerboard sectors appear to be stabilizing with promising pricing prospects for 2025. Ravi suggested that spot forest prices could be nearing their lowest point, with transaction volumes beginning to improve gradually.
Despite these developments, Citi maintains a Neutral stance on SCA stock, citing more attractive investment opportunities elsewhere. The analyst highlighted SCA’s high integration and self-sufficiency as factors that should sustain high margins. However, he also mentioned that the company’s returns have been underperforming and that SCA remains the most expensive stock within Citi’s coverage universe.
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