US stock futures steady with China trade talks, Q3 earnings in focus
Investing.com - UBS downgraded Orion Engineered Carbons S.A. (NYSE:OEC) from Buy to Neutral on Friday, while reducing its price target to $7.00 from $12.00. The stock, currently trading at $6.16, has declined nearly 65% over the past year, with analyst targets ranging from $7 to $15. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics.
The downgrade reflects UBS’s revised outlook on western tire production, which directly impacts carbon black demand. The firm noted that U.S. tire imports remained elevated at more than 10% year-over-year in July, creating pressure on domestic tire production and carbon black demand in Europe and the U.S., regions that represent 65% of OEC’s exposure. InvestingPro data shows the company maintains a significant debt burden, with a debt-to-equity ratio of 2.47, while operating with a gross profit margin of 21.4%.
UBS reduced its EBITDA forecasts for Orion by 16%, 12%, and 11% for 2025, 2026, and 2027, respectively. These projections assume that pressure from Asian tire imports to the U.S., primarily from non-Chinese sources, will persist through 2026.
The firm’s estimates now stand approximately 13% to 14% below consensus for 2026 and 2027. UBS indicated that with OEC shares already down about 40% over the past three months, much of this downside may already be reflected in the current stock price.
While UBS expects free cash flow to remain positive and grow in 2026 as capital expenditures decrease, it has revised its FCF projection to approximately $50 million, down from about $100 million previously. The firm believes evidence of Orion’s earnings and free cash flow improvement will likely emerge later than initially expected, primarily in the second half of 2026 and into 2027. Recent InvestingPro data indicates the company is quickly burning through cash, with negative levered free cash flow of $72.6 million in the last twelve months.
In other recent news, Orion S.A. has announced a significant reduction in its full-year 2025 earnings guidance due to weaker demand in the tire manufacturing sector. The company reported preliminary third-quarter adjusted EBITDA of approximately $55 million and revised its full-year 2025 adjusted EBITDA forecast to between $220-$235 million, down from the previous guidance of $270-$290 million. Analysts had initially estimated an EBITDA of $270 million for the year. This development follows operational challenges that have impacted Orion’s performance.
Additionally, the company has shifted its focus towards cash management amid these challenges. In response to these developments, Mizuho downgraded Orion Engineered Carbons from Neutral to Underperform, citing concerns over tire imports and setting a price target of $9.00. Meanwhile, Jefferies has maintained a Buy rating on Orion but lowered its price target from $15.00 to $14.00, pointing to near-term demand headwinds. These recent developments reflect the pressures facing Orion S.A. in the current market environment.
This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.