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On Tuesday, BMO Capital Markets adjusted its stock price target for Ingevity Corp (NYSE:NGVT), a company specializing in specialty chemicals and materials. The new price target is set at $45.00, a decrease from the previous figure of $55.00. Despite the change, the firm maintains a Market Perform rating on the stock.
Ingevity recently concluded an arrangement with its crude tall oil (CTO) supplier Georgia-Pacific, agreeing to a $100 million payment to terminate their longstanding supply contract. This decision comes after Ingevity ended another supply agreement with WestRock (NYSE:WRK) on June 30, which, combined with Georgia-Pacific, represented 82% of Ingevity's CTO supply in 2023.
The agreement to conclude the supply contracts is viewed as a strategic move for Ingevity, potentially beneficial in mitigating the impact of CTO costs on the company's future free cash flow (FCF). The $100 million expense for the termination of the Georgia-Pacific contract is reflected in the revised price target.
The analyst from BMO Capital Markets remarked on the development, noting the positive nature of these steps for Ingevity's financial outlook. The termination of these supply agreements is seen as a way for Ingevity to alleviate some of the pressures on its FCF, despite the immediate financial cost.
Ingevity's actions to end these key supplier relationships come as a significant move for the company, aiming to streamline its operations and improve its financial position. The revised price target from BMO Capital Markets takes into account the immediate costs associated with these decisions.
In other recent news, Ingevity Corporation has had a strong start to the first quarter of 2024, with key segments, especially the Performance Materials segment, exceeding expectations. Despite challenges with its Crude Tall Oil operations, the company has maintained its full-year guidance, projecting sales between $1.4 billion and $1.55 billion and adjusted EBITDA from $365 million to $390 million.
Ingevity is also actively exploring alternatives for its AFA/OLEO-based products within its Performance Chemicals division, although the timeline for these alternatives remains uncertain.
In executive team transitions, the company's Executive Vice President, General Counsel, and Secretary, Stacy L. Cozad, resigned, and Ryan C. Fisher has been appointed to succeed her. Cozad's resignation was effective immediately, and the company has entered into a transition agreement with her.
Analyst firms BMO Capital Markets and Loop Capital have adjusted their price targets for Ingevity, raising them to $55.00 and $56.00 respectively, due to the company's strong performance. However, both firms express a neutral stance on the risk/reward balance for Ingevity's stock due to ongoing transformations and uncertainties. These are some of the recent developments for Ingevity Corporation.
InvestingPro Insights
As Ingevity Corp (NYSE:NGVT) navigates through strategic changes, current data from InvestingPro provides a deeper understanding of the company's financial landscape. With a market capitalization of $1.52 billion, Ingevity's valuation reflects the challenges it faces. The company's P/E ratio stands at -13.54, indicating that it has not been profitable over the last twelve months. However, the adjusted P/E ratio for the same period suggests an expectation of future profitability, with a value of 21.09.
InvestingPro Tips reveal that management's aggressive share buybacks and the anticipation of net income growth this year could signal confidence in the company's direction. Yet, it is worth noting that four analysts have revised their earnings estimates downwards for the upcoming period. Additionally, while Ingevity does not currently pay dividends, analysts predict the company will become profitable this year.
For readers looking to delve further into Ingevity's prospects and receive additional insights, InvestingPro offers more tips on the company's potential. Use coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription, and gain access to the full suite of tips. Presently, there are six additional InvestingPro Tips available for Ingevity, providing a comprehensive analysis for informed investment decisions.
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