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    Neste stock rises on potential turnaround in Renewable Products segment



    On Thursday, Morgan Stanley upgraded Neste Oyj (NESTE:FH) (OTC: NTOIY) stock, a Finnish oil refining and marketing company, from Equalweight to Overweight, adjusting the price target to €27.50, up from the previous €22.30.

    The upgrade comes after a period of challenges for the company, including a deteriorating macro environment and operational issues that have negatively impacted its stock performance, particularly in the Renewable Products segment.

    The analyst from Morgan Stanley noted that Neste’s share price has historically been sensitive to the sales margin and earnings expectations for its Renewable Products division.

    Over the past few years, the company faced several setbacks, such as a decline in the macro environment for Renewable Diesel and Oil Products, and operational delays at its Singapore and Martinez renewable plants.

    These difficulties were compounded by a decrease in biofuel mandates in key markets like Sweden and Finland, as well as a significant drop in US D4 RIN and California’s LCFS credit prices. As a result, Neste issued a profit warning for its Renewable Products segment and reported a substantial fall in its second-quarter 2024 Renewable Products sales margin and EBIT.

    The upgrade by Morgan Stanley suggests a renewed optimism in Neste’s potential for recovery and growth. The new price target of €27.50 represents a notable increase from the previous target, indicating a positive outlook for the company’s stock in the near future.

    Investors and market watchers will be keeping an eye on Neste’s performance, particularly in the Renewable Products sector, to see if the company can overcome the recent challenges and capitalize on the opportunities that have led to the upgraded stock rating and price target.

    In other recent news, Neste Oyj’s stock has seen a variety of analyst upgrades and downgrades. Redburn-Atlantic revised its stance on Neste’s stock, upgrading it from Neutral to Buy, due to anticipated improvements in refining margins and sustainable aviation fuel (SAF) profitability.

    The firm also increased the price target to EUR25.00 from EUR23.00. Redburn-Atlantic’s analysis suggests that renewable diesel refining margins are at or nearing their lowest point, and SAF profitability should become evident shortly.

    On the other hand, RBC Capital downgraded Neste’s stock from Outperform to Sector Perform due to operational issues, unclear company messaging, and recent political shifts impacting market sentiment and earnings projections. The firm also reduced the price target from €38.00 to €21.00.

    Similarly, CFRA downgraded Neste due to a disappointing first quarter in 2024 and ongoing plant disruptions, reducing the 2024 EPS prediction to €1.95 from €2.45, and the 2025 EPS estimate to €2.30 from €2.60.

    Despite weak Q2 results, Berenberg maintained its Buy rating on Neste stock with a steady price target of EUR22.00. The firm’s analysis suggests a potential for value appreciation in the future, particularly with the Martinez renewables project.

    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 paints a detailed picture of Neste Oyj’s (OTC: NTOIY) financial health and market performance. With a market capitalization of $17.83 billion and a P/E ratio standing at 16.86, Neste Oyj demonstrates a significant presence in its sector. Despite a revenue decline in the last twelve months as of Q2 2024 by 8.72%, the company has a strong dividend yield of 4.43%, which is noteworthy considering it has maintained dividend payments for 19 consecutive years. This commitment to shareholder returns, alongside a record of profitability over the last twelve months, underscores Neste’s financial resilience.

    InvestingPro Tips indicate that analysts have recently revised their earnings expectations downwards, which could signal caution for potential investors. On the other hand, Neste’s stock is currently considered to be in overbought territory according to the Relative Strength Index (RSI), suggesting that the market sentiment is positive but may also warrant careful consideration for those looking to enter at current prices. Prospective investors should note that InvestingPro offers additional insights, with a total of 9 InvestingPro Tips available for Neste Oyj, providing a comprehensive analysis of the company’s financial and market performance.

    For those interested in a deeper dive into Neste Oyj’s stock, further details and metrics can be found on InvestingPro’s platform, including the company’s ability to operate with a moderate level of debt and its liquid assets exceeding short-term obligations. These factors contribute to a more nuanced understanding of Neste’s operational and financial stability, which is crucial for making informed investment decisions.

    This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.


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