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On Friday, Stora Enso OYJ (HE:STERV:FH) (OTC:SEOAY) shares received an upgrade in stock rating from ’Hold’ to ’Buy’ by Stifel analysts, with a slight adjustment in the price target to EUR11.00 from the previous EUR11.10. While the company’s stock has declined 32% over the past year, InvestingPro data shows analysts expect net income growth this year. Stifel’s analysis indicates that although Stora Enso’s earnings are on a gradual recovery path, they are currently subdued. The first quarter of 2025 operating EBIT outperformed the low expectations, benefiting from favorable foreign exchange conditions and reduced depreciation due to an asset impairment recognized in the fourth quarter of 2024.
Despite a weak underlying performance, with the stock trading at $9.25, InvestingPro analysis suggests the company is fairly valued. The firm identifies two potential catalysts that could lead to a positive shift in the company’s trajectory. Worth noting, the company maintains a strong dividend track record, having paid dividends for 29 consecutive years. Firstly, the completion of the new €1.1 billion Oulu machine, which is now in the ramp-up phase, is expected to bring down capital expenditures and enhance cash flow. Secondly, the potential sale of a 12% stake in Swedish forest lands could add approximately €0.80 or around 10% to the share value.
Stifel’s commentary highlighted that the Oulu machine’s start-up is likely to impact the profit and loss statement, with a forecasted €100 million negative effect in 2025. However, the analysts are optimistic about the future financial improvements following the project’s completion.
The upgrade comes with the expectation that these developments will provide a positive direction for Stora Enso’s stock. Stifel’s analysis suggests that the successful completion of the Oulu project and the sale of forest lands could significantly enhance shareholder value.
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