On Wednesday, Evonik Industries AG (ETR:EVKn) (XETRA:EVK) (OTC:EVKIF) saw its stock rating lowered by Jefferies from "Hold" to "Underperform," accompanied by a reduction in the price target to €16.60 from the previous €21.00. The firm cited several factors contributing to a less optimistic outlook for Evonik's earnings potential through 2025 compared to its peers in the chemical sector.
The downgrade is attributed to expectations of a challenging operational environment for Evonik. According to the firm, methionine prices are anticipated to create a headwind of approximately €100 million leading into 2025, as the global supply/demand balance is predicted to weaken in the coming months.
While cost savings and lower energy prices could offer some support, Evonik's initial advantage of protecting earnings during downturns is considered to be already factored into its current market position.
Moreover, the analysis indicates that volume growth in Evonik's remaining segments has historically been slower than that of its diversified peers throughout economic cycles. The firm also pointed out that Evonik's plant ramp-ups and other organic growth initiatives appear to be more limited in comparison to competitors such as Arkema (EPA:AKE).
Furthermore, product spreads across Evonik's Performance Materials segment are expected to present additional earnings challenges as the company heads towards 2025.
The firm's forecast for Evonik's financial performance is less than favorable, projecting a 2% decline in group EBITDA for the fiscal year 2025, in stark contrast to an anticipated 12% growth for the broader chemical industry peers. This outlook suggests that Evonik may face a tougher road ahead in maintaining its financial growth amidst a competitive and shifting market landscape.
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