On Friday, Goldman Sachs adjusted its outlook on Sika AG (SIX:SIKA:SW) (OTC: SKFOF) shares, increasing the company's price target to CHF309.00 from the previous CHF298.00. The firm reiterated its Buy rating on the stock, anticipating a favorable gross margin trend in the first half of the year due to ongoing declines in raw material costs.
The analyst from Goldman Sachs expressed confidence in Sika AG's performance, projecting an EBIT of €864 million for the first half of 2024, which is 3% above the consensus.
This forecast is supported by an expected rise in gross margin to 55.6%, up by 290 basis points year-over-year, and a 2% like-for-like sales growth for the second quarter, aligning with market expectations.
The anticipated increase in gross margin is attributed to a decrease in raw material costs, as indicated by the firm's raw materials tracker, and sustained strong pricing, echoing recent statements from the company.
The positive outlook is also backed by historical data showing that Sika AG's gross margin in the first half of the year has typically been 140 basis points higher compared to the fourth quarter of the preceding year, based on the period from 2011 to 2020.
Goldman Sachs' updated price target reflects a broader optimism regarding Sika AG's ability to navigate the cost environment effectively and maintain profitability. The firm's analysis suggests that the company's strategies to manage expenses and pricing are likely to continue contributing to a robust financial performance in the near term.
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