On Friday, CFRA downgraded shares of Neste Oyj (NESTE:FH) (OTC: NTOIY) from Strong Buy to Hold, significantly lowering their target price to €30.00 from the previous €55.00. The adjustment reflects a reassessment of the company’s near-term financial prospects in light of expected margin pressures and operational challenges.
Neste Oyj, which operates in the renewable fuels sector, is facing a turbulent market. The company is targeting a significant reduction in margins for its renewable products to between US$600 and US$800 per tonne in 2024, down from US$863 per tonne seen in 2023. This forecast assumes increased market volatility, a decline in U.S. RIN credits, and reduced profits from the company’s new plants.
The downgrade coincides with the release of Neste’s fourth-quarter 2023 earnings report. Reported earnings per share (EPS) of €0.66 represented a decline of 21% year-on-year and 25% quarter-on-quarter. The company’s comparable EBITDA for the quarter was €797 million, down 11% year-on-year and 24% year-on-year. The figures were in line with expectations, although they were impacted by lower refining margins of $18.9 per barrel and higher fixed costs.
Operational challenges were also noted, with utilization levels at Neste’s Singapore facility reaching expected levels of 75% in the fourth quarter of 2023. However, utilization levels at the Martinez plant remained below 50% due to a fire outbreak late in the year.
Looking ahead, CFRA adjusted Neste’s 2024 earnings per share forecast to €2.35 from €2.90 and set its 2025 earnings per share target at €2.50. The new price target of €30 is based on a 12 times price-to-earnings (P/E) ratio for 2025, in line with the average of Neste’s peers. This recalibration by CFRA is in line with the company’s short-term objectives and the uncertain start of its new plant.
This article was created with the help of AI and reviewed by an editor. For more information please see our Terms and Conditions.