On Tuesday, Brenntag AG (BNR:GR) (OTC: BNTGY) saw its price target lowered by CFRA from EUR71.00 to EUR67.00, while the Sell rating on the stock was maintained. The revision comes after the company reported a decline in its first-quarter revenue and earnings, which fell short of analyst expectations.
Brenntag's Q1 2024 revenue dropped by 10.9% year-over-year to EUR4.00 billion, missing the forecasted EUR4.25 billion. This was attributed to an increase in business volume that failed to counteract a decrease in prices.
The company's earnings before interest and taxes (EBIT) also saw a significant decrease of 28% year-over-year to EUR239 million, which did not meet the consensus estimate of EUR250 million. A notable deterioration in free cash flow was observed, with a 61% year-over-year decline to EUR175 million. Should this trend in free cash flow persist into the second quarter, CFRA anticipates that Brenntag may reduce its dividend payment for 2024.
Brenntag's net debt experienced a slight uptick, rising to EUR2.23 billion from the EUR2.19 billion recorded at the end of 2023. In response to these financial results, CFRA has also reduced its earnings per share (EPS) estimates for Brenntag, bringing down the 2024 EPS projection from EUR5.14 to EUR4.85 and the 2025 EPS forecast from EUR5.48 to EUR5.25. This adjustment is based on the assumption of a continued lower selling price.
Furthermore, Brenntag's management has revised its 2024 operating EBITA guidance towards the lower spectrum of the previously stated range of EUR1.23 to EUR1.43 billion. The Sell rating on the stock is a reflection of CFRA's expectation that earnings weakness will persist across both segments of the company in the second quarter and the second half of 2024.
InvestingPro Insights
In light of Brenntag AG's recent financial performance, investors may find the following InvestingPro Insights particularly informative. The company's market capitalization stands at a robust $11.09 billion, with a Price/Earnings (P/E) ratio of 15, which adjusts to 16.38 when considering the last twelve months as of Q4 2023. Despite the reported downturn in revenue, Brenntag maintains a Gross Profit Margin of 24.04%, showcasing its ability to retain a significant portion of sales as gross profit.
From an InvestingPro Tips perspective, Brenntag's management has been actively engaging in share buybacks, indicating confidence in the company's value. Moreover, the company has a history of rewarding shareholders, having raised its dividend for 14 consecutive years.
While some analysts have revised their earnings expectations downwards for the upcoming period, the company's low price volatility and status as a prominent player in the Trading Companies & Distributors industry remain key factors for investors to consider. For those interested in further insights, there are 11 additional InvestingPro Tips available, which can be accessed at https://www.investing.com/pro/BNTGY. Don't forget to use coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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