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On Friday, Mizuho (NYSE:MFG) Securities adjusted its outlook on shares of Orion Engineered Carbons S.A. (NYSE: NYSE:OEC), reducing the price target on the company's shares to $17.00 from the previous $18.00. The firm has chosen to maintain a Neutral rating on the stock.
According to InvestingPro data, the stock is currently trading near its 52-week low of $14.07, having declined nearly 38% over the past six months. Analyst targets now range from $17 to $24, suggesting potential upside despite recent challenges.
The decision to lower the price target comes after Orion Engineered Carbons revealed expectations for its adjusted EBITDA for the December quarter of 2024 to fall below the low end of its prior guidance, which was around $65 million, compared to the previous midpoint estimate of $70 million.
Mizuho analysts have accordingly revised their December quarter EBITDA forecast for Orion to $61 million, down from $70 million. This reduction includes an approximate $5 million impact from foreign exchange headwinds due to a strengthening U.S. dollar and one-time cost reduction expenses. For context, InvestingPro shows the company's last twelve months EBITDA stands at $230.7 million, while two analysts have recently revised their earnings estimates downward.
The analysts cited several factors for the lowered expectations, including weaker-than-anticipated Rubber volumes, a less favorable Specialty mix, and the aforementioned foreign exchange and one-time costs. Despite the price target reduction, Mizuho has not altered its Neutral stance on the stock.
The report further noted that while the valuation metrics for Orion Engineered Carbons are not considered demanding, the analysts do not anticipate a quick improvement in the current challenges faced by the company. This outlook reflects a cautious stance on the near-term prospects for the stock, given the various headwinds it is currently facing.
In other recent news, Orion Engineered Carbons has experienced a series of developments. The company's projected EBITDA for 2024 is expected to be slightly below the initial forecast of $305-$315 million due to foreign exchange challenges, severance costs, and weaker demand trends. Jefferies analysts have adjusted their outlook on Orion shares, reducing the price target from $26.00 to $24.00, while maintaining a Buy rating.
On the other hand, JPMorgan upgraded Orion from Neutral to Overweight, despite reducing the 2024 earnings per share (EPS) estimate from $1.90 to $1.65. The company has also announced a moderate increase in its adjusted EBITDA for the third quarter of 2024, marking a 7% sequential and 4% year-over-year rise to $80 million.
Orion's future plans include reducing capital expenditures by approximately $30 million in 2025, with a further decline of $50 million to $60 million by 2026. Despite facing challenges in tire production within key markets due to high volume of tire imports from Asia, Orion's executives expressed optimism about the firm's growth potential and operational performance for the coming year.
These recent developments highlight Orion's focus on operational efficiency, cost management initiatives, and strengthening customer relationships to support growth.
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