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On Wednesday, KeyBanc Capital Markets adjusted its stance on Materion Corp . (NYSE: NYSE:MTRN), downgrading the stock from Overweight to Sector Weight. The decision came after a thorough review of Materion’s first-quarter earnings for 2025 and subsequent analysis by the firm. The downgrade comes amid a challenging period for Materion, with the stock down over 33% in the past six months, according to InvestingPro data.
KeyBanc analysts cited a combination of factors leading to the downgrade, including a reduction in their earnings estimates for the years 2025 and 2026. The revised estimates take into account a lower profit baseline for the first quarter of 2025 and the anticipated continuing impact of tariffs on China throughout the rest of 2025 and into 2026. InvestingPro data shows that three analysts have recently revised their earnings estimates downward, while the company maintains a high P/E ratio of 163x despite strong fundamentals including a healthy current ratio of 2.84.
The analysts noted that the tariffs imposed on China are expected to have a relatively more significant impact on Materion’s financial performance over the forecast period. This has led to a more cautious outlook on the company’s stock, reflected in the change to a Sector Weight rating.
In their comments, KeyBanc analysts stated, "Following Materion Corporation’s 1Q25 earnings/our analysis, we are easing our rating to Sector Weight from Overweight, consistent with our downward earnings revisions and a modestly lower valuation range." They also mentioned that they are "reducing our 2025E-2026E EPS to reflect a lower 1Q25 profit baseline plus relatively penal impacts from China tariffs over the balance of 2025-2026."
The analysts left open the possibility of reassessing their position on Materion in the future, should there be significant changes in the macroeconomic environment, particularly regarding the tariffs on China. "Should macro conditions change, including some secession of China tariffs, we would consider becoming more positive," they concluded. According to InvestingPro’s Fair Value analysis, the stock appears undervalued at current levels, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of Materion’s financial health, valuation metrics, and growth prospects.
In other recent news, Materion Corporation reported its first-quarter 2025 financial results, surpassing analysts’ expectations. The company posted an adjusted earnings per share (EPS) of $1.13, exceeding the forecasted $1.05, and revenue reached $420.3 million, above the anticipated $395.2 million. The aerospace sector notably contributed to this performance with a 30% growth. Materion reaffirmed its full-year EPS guidance of $5.30 to $5.70, showcasing confidence in its operational strategies. The company aims for a 20%+ EBITDA margin for the year, with a long-term goal of reaching a 23% margin. Analysts from KeyBanc and CJS Securities discussed potential impacts of tariffs on sales to China, which could affect approximately $100 million in annual revenue. Despite these challenges, Materion remains focused on mitigating tariff impacts and maintaining strong cash flow throughout 2025.
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