Tronox stock rating downgraded by BMO Capital on demand challenges

Investing.com - BMO Capital downgraded (NYSE:TROX) from Market Perform to Underperform and slashed its price target to $3.00 from $7.00 on Monday. The stock, currently trading at $5.64, has already declined over 61% in the past year, with a beta of 1.39 indicating higher volatility than the broader market. According to InvestingPro data, the company operates with a significant debt burden, reflected in its debt-to-equity ratio of 1.85.

The research firm cited multiple challenges affecting Tronox, including a difficult demand environment characterized by weak U.S. housing, soft construction markets in China, and listless demand across Europe.

BMO Capital noted that pricing remains difficult even in tariff-protected areas due to the combination of soft demand and fierce competition in the market.

The firm also highlighted that high costs are moving more slowly through Tronox’s profit and loss statement, creating additional pressure on the company’s financial performance.

BMO Capital warned of "significant risk" to Tronox’s 2025 and 2026 earnings and cash flows, adding that the company’s high leverage could put its dividend at risk.

In other recent news, Tronox Holdings PLC reported its financial results for the first quarter of 2025, revealing a net loss of $111 million, with earnings per share (EPS) at -$0.15, falling short of the expected $0.02. The company’s revenue reached $738 million, which was also below the anticipated $751.59 million. Meanwhile, JPMorgan has upgraded Tronox’s stock rating from Neutral to Overweight, raising its price target from $5.00 to $7.00, citing favorable market conditions and potential for titanium dioxide price increases. Conversely, BMO Capital Markets downgraded Tronox from Outperform to Market Perform, reducing its price target to $7.00 due to high-cost inventories and a less favorable outlook for the second quarter.

Tronox is facing challenges with its high-cost inventories, particularly from its Botlek facility and mining business, which are expected to impact its financial performance negatively. The company has outlined a strategy to target significant cost improvements by the end of 2026 and anticipates a stronger performance in the second half of 2025. Despite the current difficulties, Tronox is leveraging its strategic advantages, such as its position as the sole TiO2 producer in Brazil, to navigate the tough macroeconomic environment. The company is also focusing on operational efficiency and cost reduction initiatives to enhance future earnings.

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