On Friday, UBS analysts adjusted the firm's stance on Commercial Metals Company (NYSE:CMC), upgrading the stock rating from Sell to Neutral while also reducing the price target to $54 from the previous $56.
The revision follows a significant decline in the company's share value, with a drop of approximately 23% since November 29, 2021.
UBS cited a more balanced risk/reward profile for the change in rating. Commercial Metals now trades at roughly 6.3 times next twelve months (NTM) enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which aligns with its historical trough multiples. This is a notable decrease from the 7.6 times it was trading at in November, which represented a five-year high.
The price target adjustment comes in the wake of lowered fiscal year 2025 earnings per share (EPS) estimates by 20%, due to persistent challenges in Europe, such as import pressures, along with project delays at Tensar and a softening market in the U.S. truck and trailer sector.
Despite the reduced earnings forecast, UBS's commentary suggests a belief that the recent sell-off in Commercial Metals shares has created a more equitable risk/reward situation for investors.
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