RBC downgrades Nufarm stock as earnings guidance and earnings outlook worsen by Investing.com
On Friday, RBC Capital adjusted its position on Nufarm (OTC:) Ltd stock. (ASX:NUF) (OTC:NFRMY), downgraded the agrochemical company from Outperform to Sector Perform.
The company also revised its price down to AUD4.75 from AUD6.25 previously. The adjustment follows Nufarm's announcement of a cut in profits for the 2024 financial year.
Nufarm revised several financial projections, including a 15% drop in its FY24 EBITDA guidance, which is now set at between $300 million and $330 million.
Additionally, the company expects a higher average ratio, with total debt to EBITDA estimated at 2.5 to 2.7 times, up from the previous forecast of 1.5 to 2.0 times. Nufarm also confirmed its intention to reduce total working capital by $500 million by the end of the first half of FY24.
Alongside these financial updates, Nufarm lowered its FY24 Omega-3 product revenue guidance to $50 million, down from the previous range of $50 million to $70 million. As a result of these revisions, RBC Capital lowered its EBIT estimates for Nufarm for fiscal years 2024, 2025, and 2026 by 27%, 18%, and 13%, respectively.
The company cited limited visibility and a high operating ratio as reasons to add a risk rating to Nufarm's stock. This change reflects the firm's view of increased uncertainty regarding Nufarm's financial performance in the near term.
In other recent news, Nufarm Ltd. has experienced a series of financial changes following the release of its results for the first half of 2024. The company reported earnings before interest, taxes, depreciation, and amortization (EBITDA) at $217 million, a 31% year-over-year decline.
This figure also fell short of both RBC Capital's estimates and the consensus by 11%. Additionally, Nufarm declared a dividend of 4 cents per share, which was less than the expected 5 cents per share.
In response to these results, RBC Capital Markets lowered its price target for Nufarm from AUD6.75 to AUD6.25, maintaining an Outperform rating. The company expects a multiple of the initial pricing power in fiscal year 2025, predicting a compound annual growth rate (CAGR) of EBITDA of approximately 20% over the next three years.
Meanwhile, JPMorgan adjusted its stance on Nufarm, downgrading the company's stock rating from Overweight to Neutral. The company also set a new target price of AUD 5.50, down from the previous target of AUD 6.00.
Despite the decline, JPMorgan noted growth opportunities in the Seeds division, expecting revenue and earnings to rise as the company continues to sell its products. These are the main financial indicators of Nufarm Ltd.
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