JPMorgan raises Ashland stock rating to overweight, target to $71

On Wednesday, JPMorgan analyst Jeffrey Zekauskas upgraded Ashland Inc . (NYSE: NYSE:ASH) stock rating from Neutral to Overweight, lifting the price target to $71.00 from the previous $68.00. Zekauskas highlighted Ashland’s resilience as a non-cyclical specialty company despite recent challenges that have led to a significant drop in its stock value. According to InvestingPro data, the stock is currently trading near its 52-week low of $54.86, with shares at $56.93.

Ashland, known for its pharmaceutical intermediates and additives for personal care products, experienced negative earnings momentum due to customer de-stocking after the post-COVID product scarcity period. The company also faced headwinds from a decline in demand within the domestic construction sector amid rising interest rates and a sluggish housing market in China. Despite these issues, Zekauskas believes the setbacks are temporary rather than fundamental to Ashland’s business.

The company’s stock has underperformed the market, with a year-to-date decrease of 20% in a market down by 2%, and a 12-month decline of 40% against a market that gained 11%. However, JPMorgan’s analysis suggests that Ashland’s current trading value, at approximately 9.2 times the EV/EBITDA multiple for fiscal year 2025 and 8.3 times for fiscal year 2026, presents a compelling valuation. InvestingPro analysis reveals the stock has taken a significant 34% hit over the last six months, though it maintains a remarkable 55-year streak of consistent dividend payments, currently yielding 2.85%.

Ashland’s financial health appears robust, with a solid balance sheet characterized by a net debt to EBITDA ratio of around 2.5 times. The company is also projected to generate between 7% and 8% of its share price in free cash flow for fiscal years 2025 and 2026. Based on these factors, Zekauskas views the current share price as an attractive entry point for investors. This view aligns with InvestingPro analysis, which indicates the stock is currently undervalued, with a strong current ratio of 2.52 showing liquid assets well exceed short-term obligations. For deeper insights into Ashland’s valuation and 10+ additional ProTips, explore the comprehensive Pro Research Report available on InvestingPro.

In other recent news, Ashland Inc. reported its first-quarter earnings for fiscal year 2024, revealing an adjusted earnings per share (EPS) of $0.28, surpassing the forecast of $0.24. However, the company’s actual revenues of $405 million missed the revenue forecast of $431.72 million. Ashland has completed the sale of its Avoca business to Mane, a fragrance and flavor manufacturer, as part of its strategy to streamline its portfolio. The financial terms of the transaction were not disclosed. In analyst updates, Jefferies revised Ashland’s stock price target to $82.00 from $92.00, maintaining a Buy rating, while Seaport Global Securities downgraded the stock from Buy to Neutral. BMO Capital Markets also adjusted Ashland’s price target from $84.00 to $77.00, maintaining a Market Perform rating. Analysts have expressed concerns about Ashland’s competitive position in the Specialty Additives market, particularly in China, and the challenges in the Life Sciences segment. Despite these challenges, Ashland reaffirmed its full-year sales guidance of $1.9 billion to $2.05 billion and is focusing on product innovation and cost-saving initiatives.

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