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Investing.com -- Jefferies has downgraded Dowlais plc (LON:DWL) from Buy to Hold while raising its price target to 75p from 70p, following affirmative votes for the company’s merger with American Axle (AXL) in recent weeks.
The new price target represents a 4% upside from Dowlais’s current share price of 72.10p, falling below Jefferies’ 15% threshold for a Buy rating on a 12-month view.
The merger transaction is expected to close in the fourth quarter of 2025, subject to remaining conditions. The proposed merger with American Axle currently has an implied offer price of 75.1p.
Jefferies maintained its forecasts for Dowlais, projecting earnings per share of 10.68p for fiscal year 2025, 13.27p for 2026, and 15.00p for 2027.
This compares to consensus estimates of 11.80p for 2025 and 14.70p for 2026, with Jefferies’ projections coming in 9% and 10% below consensus for those years respectively.
The firm expects Dowlais to generate revenue of £4.62 billion in 2025, slightly below the consensus estimate of £4.65 billion. For 2026, Jefferies forecasts revenue of £4.71 billion.
Dividend yield is projected at 5.19% for 2025, 5.52% for 2026, and jumping significantly to 20.80% for 2027. The company’s net debt to EBITDA ratio is expected to improve from 1.9x in 2025 to 1.6x by 2027.
Dowlais is anticipated to return to positive free cash flow in 2026 with £70.1 million, improving further to £137.7 million in 2027, after a projected negative free cash flow of £22.1 million in 2025.