On Wednesday, JPMorgan adjusted its price target for Essity AB (ESSITYB:SS) (OTC: ESSYY) shares, increasing it slightly from SEK250.00 to SEK255.00 while maintaining an Underweight rating on the stock. The firm's outlook is based on a recent review of estimates for the company as it approaches its second-quarter 2024 results, which are scheduled for release on July 18, 2024.
The revision follows Essity's recent disclosure of new mid-term financial goals and the initiation of share buybacks. However, JPMorgan anticipates that the primary driver for the stock will be its earnings momentum, which the firm views as remaining negative. Expectations for the second quarter include modest top-line growth and a sequential easing of the adjusted EBITA margin, largely due to increasing pulp costs.
JPMorgan has also adjusted its full-year 2024 forecasts for Essity's adjusted EBITA and earnings per share (EPS), reducing them by approximately 2%. This change takes into account the near-term challenges posed by rising pulp expenses and unfavorable foreign exchange rates, which are only partially mitigated by the company's share buyback program.
The upcoming financial report is expected to draw significant attention to Essity's pricing strategies, especially within the European Tissue segment. This focus is a consequence of the ongoing surge in pulp costs, which have risen by around 20% year-to-date on average. Competitors have announced price hikes, and the market is keen to see how this will affect Essity's short-term profitability.
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