On Wednesday, BofA Securities adjusted its outlook on Sociedad Quimica y Minera (NYSE:SQM), reducing the price target to $37 from the prior $38, while continuing to recommend an Underperform rating on the shares. According to InvestingPro analysis, SQM appears undervalued at its current price of $38.37, despite maintaining dividend payments for 31 consecutive years. The revision followed SQM’s announcement of fourth-quarter earnings for 2024, which fell short of expectations.
The Chilean chemical company reported earnings before interest, taxes, depreciation, and amortization (EBITDA) of $318 million, which was not only 5% below the estimates of both BofA and Visible Alpha but also represented a 23% year-over-year decline. Despite revenues reaching $1.07 billion, 10% higher than BofA’s forecasts due to robust lithium and potash volumes, the company’s financial performance was dampened by narrower gross margins and increased expenses. InvestingPro data shows the company’s trailing twelve-month revenue at $4.77 billion, with analysts anticipating a significant sales decline in the current year.
SQM’s gross margin suffered, coming in 230 basis points below BofA’s estimates. The decrease was primarily attributed to elevated costs in iodine and specialty plant nutrition (SPN). Selling, general, and administrative (SG&A) expenses also exceeded projections, further impacting the bottom line.
The company’s earnings per share (EPS) for the quarter stood at $0.42, which was significantly lower than anticipated. The reported EPS was 36% beneath BofA’s projection and 26% below the consensus, due in part to higher financial expenses that the company incurred during the period. For deeper insights into SQM’s financial health and future prospects, including additional ProTips and comprehensive analysis, visit InvestingPro, where you’ll find detailed research reports and expert forecasts.
In other recent news, Citi analysts have adjusted their price target for Sociedad Quimica y Minera (SQM) to $54.00, down from the previous target of $60.00. Despite this reduction, Citi has maintained a Buy rating on SQM, indicating continued confidence in the company’s potential. The adjustment is primarily due to expected lower short-term lithium prices, although Citi anticipates robust global lithium demand growth in the coming years. Notably, the firm projects that SQM’s EBITDA for 2024 will experience a significant 55% year-over-year decrease. However, Citi has revised its fourth-quarter 2024 estimates for lithium volume sales upward, expecting SQM to reach its highest historical sales volume of 53,000 tons. Looking ahead, the firm forecasts a 24% year-over-year increase in EBITDA for SQM in 2025. Additionally, Citi predicts an increase in lithium sales volume for 2025 by 14% compared to previous estimates. The analysts also noted that SQM’s net financial debt to EBITDA ratio was 1.6 times at the end of 2024, slightly above the management’s prudent threshold, yet they remain optimistic about the company’s financial health and market opportunities.
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