Fannie Mae, Freddie Mac shares tumble after conservatorship comments
On Friday, CFRA analyst Adrian Ng changed the rating for Umicore SA (UMI:BB) (OTC:UMICY) from ’Strong Sell’ to ’Sell’ and increased the price target from EUR8.00 to EUR10.00. The adjustment follows potential mergers and acquisitions (M&A) catalysts, such as the recent divestiture of Johnson Matthey’s Catalyst Technologies division for GBP1.8 billion, which was valued at 13.3 times its earnings before interest, taxes, depreciation, and amortization (EV/EBITDA). Umicore (EBR:UMI)’s current trading multiple is approximately 5 times EV/EBITDA.
The new price target is based on a 9 times price-to-earnings (P/E) ratio and 5.2 times EV/EBITDA for the year 2025. These figures represent a discount to Umicore’s historical averages, taking into account risks associated with long-term growth and concerns over the company’s higher leverage. Ng’s outlook considers the challenging near-term prospects for Umicore, anticipating a decline in financial performance during 2025-2026.
The expected downturn is primarily attributed to less favorable developments in Battery Materials, as the demand for electric vehicles (EV) slows and metal prices fall. Umicore’s investment in nickel and cobalt-based NMC (nickel manganese cobalt) battery materials is underperforming relative to market trends, which are moving towards lithium iron phosphate batteries. This shift has prompted a strategic review of Umicore’s battery business.
Despite the anticipated challenges in the Battery Materials sector, Umicore’s management has indicated a strong performance in the Catalysis and Recycling segments for the first quarter of 2025. However, specific financial details for these segments have not been disclosed. The company’s future performance in these areas remains a key factor to watch, as it may influence the stock’s valuation and CFRA’s rating going forward.
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