On Tuesday, BMO Capital Markets adjusted its outlook on Compass Minerals International (NYSE:CMP), reducing the stock's price target from $25.00 to $20.00, while retaining a Market Perform rating. The revision follows two significant developments affecting the company's earnings potential.
The price target was lowered after the decision to completely remove the expected earnings from Fortress, the company's new flame retardant business. This change was due to poor operational performance from its key customer, the U.S. Forest Service.
Moreover, the analyst adjusted the forecast for Highway Deicing salt volumes downward, as mild snowfall in March has continued, potentially impacting demand for deicing products.
The Fortress development was described as "shocking" by the analyst, with fiscal year 2024/25 estimates (ending in September) being reduced by approximately 8-11%. This revision comes as another setback for Compass Minerals, following the termination of its lithium project, which was previously anticipated as a growth opportunity for the company.
The new stock price target of $20.00 is based on an estimated 8-8.5 times fiscal year 2025 enterprise value to earnings before interest, taxes, depreciation, and amortization (EV/EBITDA), which reflects expectations for more normalized salt volumes. This valuation is a slight increase from the approximately 9 times 2024 EV/EBITDA that was previously projected.
Compass Minerals has been navigating operational challenges, and the latest adjustments by BMO Capital Markets reflect the firm's current assessment of the company's financial outlook and market performance potential.
InvestingPro Insights
In light of the recent developments and analyst adjustments for Compass Minerals International, here are some key InvestingPro Insights that can provide a deeper understanding of the company's current financial situation. Compass Minerals has been dealing with a significant debt burden, which is an important consideration for investors.
Moreover, while the company has maintained dividend payments for 21 consecutive years, it's essential to note that it has not been profitable over the last twelve months. However, analysts predict that the company will turn a profit this year.
From a real-time data perspective, Compass Minerals has a market cap of approximately $591.58 million and is currently trading near its 52-week low. The stock has experienced a notable price decline over the last week, month, three months, and six months, with the one-week price total return at -16.28% and the one-month return at -32.77%.
Despite these challenges, the InvestingPro platform offers additional insights and tips for investors. For those looking to explore these further, they can find 5 more InvestingPro Tips for Compass Minerals, which can be accessed with a subscription. To enhance the value of this subscription, use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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