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Investing.com -- Goldman Sachs has downgraded two major European chemical stocks namely Croda (LON:CRDA) and Lanxess (ETR:LXSG) to “sell,” citing increasing macroeconomic risks and a weaker-than-expected earnings outlook across the sector, in a note dated Friday.
The brokerage said recently heightened trade tensions and recession risks are adding to an already fragile demand environment. Its economists now project just 0.5% U.S. GDP growth in 2025, with recession odds rising to 45%.
As a result, Goldman lowered its 2025 and 2026 adjusted EBITDA estimates for 13 chemical companies by 11% and 9%, respectively—figures that place its projections well below consensus.
Croda was downgraded to “sell” from “neutral” after a sharp cut to earnings forecasts. Goldman expects adjusted EBIT for 2026 to fall 14% below consensus, driven by low pricing power, volume sensitivity, and heavy U.S. and discretionary market exposure.
The stock’s price target was cut by 36% to 2,430 pence, and analysts now see limited upside with elevated trade-related risks.
Lanxess was cut to “sell” from “buy,” with Goldman warning of poor cash generation, high leverage, and elevated exposure to cyclical end markets.
EBITDA is projected to fall 26% in 2025—more than triple the average sector decline—and its debt levels are forecast at 4.3x EBITDA, far above the peer average. The price target was reduced to €19.5 from €31, signaling further downside risk.
The sector overall faces an uncertain outlook, with Goldman now expecting a delayed cyclical recovery to mid-2026. While recent tariff developments included a 90-day pause, higher U.S.-China trade barriers, some now at 145%, continue to cloud the forecast.
Even defensive segments like consumer ingredients, previously seen as safe havens, are now vulnerable. Goldman cited rising input costs due to imported raw materials and lower pricing power as near-term risks to margins.
Despite the bleak revisions, some stocks like BASF and Akzo Nobel (OTC:AKZOY) were seen as better positioned due to their regional exposure and valuation levels. Novonesis and Air Liquide (OTC:AIQUY) also stood out for more resilient business models.
Still, Goldman stressed that much of the sector is trading at or near five-year valuation troughs, reflecting how significantly investors have already priced in macro and geopolitical risks.