TRONOX, the Basic Materials sector company, was revisited by a Wall Street analyst today. Analyst Joshua Spector from UBS downgraded the rating on the stock to a Hold and gave it a $3.60 price target.
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Joshua Spector’s rating is based on several key considerations. Primarily, the near-term challenges in volumes and earnings have led to a more cautious outlook for TRONOX. The anticipated recovery in the company’s performance is expected to take longer than previously thought, with free cash flow and leverage presenting ongoing difficulties in a weaker demand environment. Although TRONOX has reduced its dividend by 60% to address these issues, a significant improvement in demand is necessary for meaningful enhancements in free cash flow or inventory levels.
Additionally, while TRONOX’s integration into TiO2 ore/mineral sands provides above-average industry margins, it also poses a risk by potentially dragging on free cash flow and impacting earnings negatively during downturns. The company’s free cash flow yield is not projected to become attractive until 2027, contributing to the Hold rating. Spector’s analysis also notes that while there is an expected earnings lift in the coming years, it is from a lower base, and increased competition and weaker demand further delay improvements in TiO2 demand. These factors collectively justify the Hold rating as the company navigates these challenges.
Spector covers the Basic Materials sector, focusing on stocks such as Eastman Chemical, Methanex, and TRONOX. According to TipRanks, Spector has an average return of -0.5% and a 48.65% success rate on recommended stocks.
In another report released on August 1, TR | OpenAI – 4o also reiterated a Hold rating on the stock with a $3.00 price target.