On Monday, Scotiabank updated its outlook on Methanex (NASDAQ:MEOH) Corporation (NASDAQ:MEOH) stock, a global producer of methanol, by increasing the price target to $58.00 from the previous $54.00. The firm maintained its Sector Outperform rating.
The adjustment in the price target comes as Methanex exhibits a performance that is surpassing expectations. According to the analyst at Scotiabank, Methanex is on track to achieve a free cash flow (FCF) of approximately $6.50 to $7.00 in 2025, based on a mid-cycle price assumption of $350 per metric ton, which translates to a 14% yield. This robust cash flow prospect is anticipated to elevate Methanex's stock into the $60 range over time, indicating a potential upside of 35% to 40%.
Methanex's recent performance metrics have been particularly strong, with the MX-weighted spot price reaching $325 per metric ton, up from $300 per metric ton just a quarter ago. This increase in spot price suggests an implied 2025 FCF of about $5.50 per share, a significant improvement from the $4.00 per share estimated previously.
The analyst also highlighted that Methanex's actual selling price for April and May is approximately $350 per metric ton, aligning with the mid-cycle price assumption used in their free cash flow forecast. This alignment further supports the analyst's positive outlook on Methanex's financial trajectory.
InvestingPro Insights
With Methanex Corporation (NASDAQ:MEOH) showing promising financial trajectories, real-time data from InvestingPro enriches the outlook for investors. The company's commitment to shareholder returns is evident as management has been aggressively buying back shares, a move that often signals confidence in the company's future prospects. Additionally, Methanex has a longstanding history of dividend reliability, maintaining payments for 23 consecutive years, which may appeal to income-focused investors.
InvestingPro data reveals a market capitalization of $3.25 billion and a price-to-earnings (P/E) ratio that has slightly adjusted from 19.55 to 19.48 in the last twelve months as of Q1 2024. Despite a recent dip in revenue growth by -13.73% in the same period, the company's gross profit margin remains healthy at 20.04%. This financial stability is further underscored by a consistent dividend yield of 1.53% as of the latest dividend ex-date on March 13, 2024.
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