On Friday, Barclays issued a downgrade for Repsol SA (REP:SM) (OTC: OTC:REPYY), adjusting its stock rating from Overweight to Equalweight. The firm also revised the price target for Repsol, bringing it down from EUR18.00 to EUR15.00.
This change in valuation reflects a variety of pressures facing the company, including a subdued refining margin, lower US Henry Hub prices, and a slightly higher-than-anticipated net debt level as the company approaches the year 2025.
The downgrade was accompanied by a reduction in the 2024 adjusted earnings per share (EPS) estimate for Repsol, which Barclays now places at EUR2.59, a slight decrease from the previous estimate of EUR2.63. The revised EPS forecast comes in the wake of Repsol's reported adjusted net result before minority interest of EUR558 million, which not only fell below consensus estimates by 2% but also represented a 35% quarter-on-quarter decline. This drop is attributed to weaker macroeconomic conditions and disruptions in Libya.
Barclays highlighted that Repsol's earnings are likely to be more adversely affected than its peers in the fourth quarter, due to weaker refining margins, lower oil prices, and the continued subdued pricing of US Henry Hub. The chemical business segment of Repsol is also underperforming, with its contribution remaining negative.
During a recent earnings call, Repsol's CEO Josu Jon indicated that the company is facing a challenging situation. This is largely due to persistently weak demand in Europe, which continues to impact the company's performance. These factors combined have led Barclays to adopt a more cautious stance on Repsol's stock as it moves forward into the final quarter of the year and beyond.
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