Macquarie raises Kyocera stock rating to Outperform

On Wednesday, Macquarie analyst Hiroshi Taguchi upgraded Kyocera stock from Neutral to Outperform and increased the price target to JPY2,200.00 from JPY1,600.00. Despite historical challenges, the company has shown resilience with a solid financial foundation, maintaining a healthy current ratio of 3.19 and posting a 13.49% year-to-date return. Taguchi acknowledged the challenges in Kyocera’s historical financial performance, noting that in 24 out of 39 quarters over the past decade, the company’s operating profit fell short of market expectations. This underperformance was attributed to both external market pressures and a decline in the competitiveness of Kyocera’s core business.

Kyocera is currently undergoing significant corporate structural changes that aim to enhance management transparency. According to InvestingPro analysis, the company maintains strong financial health with more cash than debt on its balance sheet and has consistently paid dividends for 34 consecutive years. These changes include reforms to the board of directors and efforts to diversify management. Taguchi believes these reforms will lead to the successful execution of Kyocera’s strategic plans. These plans involve divesting non-core businesses, boosting the profitability of core operations, selling policy-held shares, and implementing large-scale share buybacks.

The analyst expressed confidence that these measures will be implemented as intended, leading to a transformation in the corporate structure of Kyocera. The revised price target reflects a more optimistic outlook on the company’s future financial performance and stock market valuation.

Kyocera’s stock market assessment has been mixed, with skepticism partly due to its inconsistent earnings history. However, the structural changes underway at Kyocera have provided a basis for a more favorable view of the company’s prospects.

The upgrade to Outperform suggests that Macquarie sees potential for Kyocera’s stock to perform better than the market average in the near future. This is a significant shift from the previous Neutral rating, indicating a change in expectations regarding the company’s ability to navigate its challenges and capitalize on its restructuring efforts.

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