On Monday, CFRA announced a revision of the price target for Posco (NYSE: PKX), reducing it to $77.00 from the previous $80.00 while sustaining a Hold rating on the stock. The adjustment follows Posco's first-quarter financial results for 2024, which, although surpassing expectations, showcased a decline in profits and revenue. Posco's net profit fell by 26% to 619 billion Korean won, and revenue decreased by 7% to 18 trillion won.
The company's operating profit dropped by 17% to 583 billion won. This was attributed to lower performance in several divisions, including Posco International, which saw a 5% decrease to 266 billion won, excluding eliminations, due to reduced gas sales volume. Posco Engineering & Construction (E&C) experienced a 38% drop to 34 billion won because of higher fixed costs and weaker regional demand, while the battery segment's profit fell by 40% to 6 billion won.
Despite these setbacks, Posco's core steel segment managed to maintain a flat operating profit at 339 billion won. The company faced challenges with a 2% decrease in average selling price (ASP), which were somewhat mitigated by lower input costs, such as iron ore and coking coal.
CFRA has adjusted its earnings per share (EPS) estimates for Posco for the years 2024 and 2025 to 7,888 won and 9,576 won, respectively. These revisions are based on expectations of higher margins. The firm remains neutral on Posco's stock, citing concerns over the potential impact of a high-interest-rate environment and a sluggish property market in China on steel demand, as well as the outlook for battery material prices.
InvestingPro Insights
Following CFRA's price target revision for Posco, current metrics from InvestingPro show a mixed financial landscape for the company. Posco's market capitalization stands at $21.69 billion, with a Price to Earnings (P/E) ratio for the last twelve months as of Q1 2024 at 20.33, suggesting that investors may be expecting future earnings growth. Despite a decline in revenue growth by 8.45% over the last twelve months, Posco's gross profit margin remains at 8.41%, indicating some level of profitability.
Two notable InvestingPro Tips for Posco include its status as a prominent player in the Metals & Mining industry and its record of maintaining dividend payments for 32 consecutive years, with a current dividend yield of 1.97%. These factors, along with the company's liquid assets exceeding short-term obligations and operating with a moderate level of debt, provide some stability for investors amidst market uncertainties.
For those looking to delve deeper into Posco's financials and future outlook, InvestingPro offers additional tips and metrics, including analyst profitability predictions for the year. Interested readers can unlock these insights and take advantage of a special offer using the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription.
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