On Thursday, Redburn-Atlantic revised its stance on Neste Oyj (NESTE:FH) (OTC: NTOIY) stock, upgrading it from Neutral to Buy and increasing the price target to EUR25.00 from EUR23.00.
The shift in rating is attributed to an anticipated improvement in the company's refining margins and the profitability of sustainable aviation fuel (SAF) in the near term. These factors are expected to mark a positive turning point for the Finnish oil refining and marketing company.
The analyst's assessment suggests that refining margins for renewable diesel (RD) are at or nearing their lowest point, and the attractiveness of SAF profitability should become evident shortly. This outlook is seen as a key factor influencing the upgrade.
Despite recent adjustments to their earnings estimates, which mainly reflect the second quarter's miss and a downgrade in guidance, the firm's analysis is retrospective.
The recent decline in Neste's share price has led to what Redburn-Atlantic considers an attractive valuation. The analyst believes that the combination of improving margins and decreasing net debt positions Neste to potentially outperform in its sector.
The upgrade comes after a period of share price weakness for Neste, indicating a potential opportunity for investors according to the analyst's view. The company's financial performance, along with strategic moves to enhance profitability, are seen as drivers for the upgraded outlook.
The new price target set by Redburn-Atlantic suggests a level of confidence in Neste's ability to recover and advance in the market. The analyst's commentary underscores the potential for improved financial performance as a catalyst for the stock's future growth.
In other recent news. Berenberg maintained its Buy rating on Neste stock, despite weak Q2 results, with a steady price target of EUR22.00.
The company's second-quarter performance was affected by low margins in its renewable business and decreased sales volumes in its Oil Products segment.
However, Berenberg's analysis suggests a potential for value appreciation in the future, considering the expected improvement in the second half of the year, particularly with the Martinez renewables project.
In contrast, RBC Capital and CFRA downgraded Neste's stock. RBC Capital's downgrade from Outperform to Sector Perform, along with a reduced price target from €38.00 to €21.00, was influenced by operational issues, unclear company messaging, and recent political shifts impacting market sentiment and earnings projections. Their revised estimates for Neste are now 26% below the consensus for 2025.
Similarly, CFRA downgraded Neste due to a disappointing first quarter in 2024 and ongoing plant disruptions. CFRA adjusted its EPS forecasts for Neste, reducing the 2024 EPS prediction to €1.95 from €2.45, and the 2025 EPS estimate to €2.30 from €2.60.
These recent developments underscore the company's increased reliance on the premium for sustainable aviation fuel and the success of ramping up production in Singapore.
InvestingPro Insights
Recent data from InvestingPro provides a deeper look into Neste Oyj's (OTC: NTOIY) financial health and market performance. With a market capitalization of $16.61 billion and a P/E ratio of 15.37, NTOIY appears to be valued in line with its earnings. The company's commitment to its shareholders is evident from its track record of maintaining dividend payments for 19 consecutive years, which is a testament to its financial stability. Moreover, the strong return over the last month, with a 16.04% price total return, aligns with the analyst's optimistic view on the stock's potential for recovery.
The InvestingPro Tips highlight that Neste has liquid assets exceeding short-term obligations, which indicates a solid liquidity position. This financial resilience, coupled with analysts' predictions of profitability for the year, provides a reassuring signal for potential investors. For those seeking additional insights, there are 4 more InvestingPro Tips available that could help in making a more informed investment decision.
It's worth noting that the company's gross profit margins have been identified as weak, which is an area investors may want to monitor closely. Despite this, Neste's long-term return over the last decade has been high, suggesting a strong historical performance. As investors consider Redburn-Atlantic's upgrade and price target adjustment, these InvestingPro Insights offer a comprehensive view of Neste's financial landscape and market prospects.
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