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On Monday, Truist Securities began coverage on shares of TRONOX (NYSE: NYSE:TROX), a titanium dioxide (TiO2) producer, with a Buy rating and a price target set at $17.00. The stock, currently trading at $10.13, has experienced significant volatility, having declined about 36% over the past six months according to InvestingPro data. The firm's analyst highlighted TRONOX's robust competitive position within the TiO2 industry, underpinned by its scale and high degree of vertical integration. These factors are cited as key drivers of the company's relatively resilient margins compared to its peers, especially during recent market downturns. InvestingPro analysis reveals that TRONOX has maintained dividend payments for 13 consecutive years, with a current dividend yield of 4.9%, demonstrating financial stability despite market challenges.
The analyst from Truist Securities expressed optimism about the TiO2 market's improving fundamentals. Additionally, the potential implementation of anti-dumping duties targeting Chinese exports is anticipated to further bolster TRONOX's market position. These duties could restrict competition from China, potentially leading to above-market volume growth for TRONOX.
The coverage initiation reflects the belief that as the TiO2 market continues to strengthen, TRONOX will be well-placed to capitalize on this momentum. The firm expects that the company's operating rates will improve, which should support significant earnings upside for TRONOX. However, InvestingPro data indicates that analysts don't expect profitability this year, with two analysts recently revising their earnings estimates downward. For deeper insights into TRONOX's financial health and future prospects, subscribers can access the comprehensive Pro Research Report, available exclusively on InvestingPro.
Truist Securities' positive outlook for TRONOX is based on the company's ability to outperform the market in terms of volume growth. This growth is expected to be a catalyst for the company's earnings, given the anticipated improvement in operating rates and market conditions.
In summary, Truist Securities has expressed confidence in TRONOX's future performance by initiating coverage with a Buy rating and setting a price target of $17.00. The firm's analysis suggests that TRONOX is positioned to benefit from favorable market dynamics and potential regulatory support in the form of anti-dumping duties. According to InvestingPro, the company maintains a healthy current ratio of 2.72, with liquid assets exceeding short-term obligations, suggesting financial stability despite current market challenges.
In other recent news, TRONOX reported its third-quarter 2024 adjusted EBITDA at $143 million, which fell short of both the Bloomberg consensus and its own guidance midpoint of approximately $155 million, according to Goldman Sachs. This underperformance was due to weaker-than-expected Titanium Dioxide (TiO2) volumes, which decreased by 7% compared to the forecasted 2-4% sequential downturn. Despite this, TRONOX's pricing remained stable with a sequential increase of 1%.
Zircon volumes did not meet expectations either, showing a 12% decline against the company's anticipation of no change from the previous quarter. In the face of these challenges, the company's management has set a fourth-quarter EBITDA guidance midpoint at $124 million, which is below the Bloomberg consensus of $159 million. TiO2 volumes are projected to fall by 10-15% sequentially, with EBITDA margins anticipated to be in the high teens due to subdued TiO2 demand.
TRONOX reported a mixed bag of results for its third quarter, with an increase in revenue to $804 million, marking a 21% rise from the previous year, despite a decline in demand, particularly in Europe and Asia Pacific. However, the company's adjusted EBITDA fell slightly short of expectations, landing at $143 million, and a net loss of $25 million was reported, along with an adjusted diluted loss per share of $0.13. These are the recent developments at TRONOX.
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