Outokumpu: Near-Term Headwinds vs. Long-Term Structural Upside Justify Hold Rating

In a report released today, Tommaso Castello from Jefferies downgraded Outokumpu Oyj to a Hold, with a price target of €5.00.

Tommaso Castello has given his Hold rating due to a combination of factors that balance Outokumpu’s recent share price strength with a lack of near-term earnings momentum. After a sharp outperformance versus the sector and a valuation now above its long‑term average on an EV/EBITDA basis, he sees limited scope for positive earnings surprises in the first half of 2026. Weak macro conditions in Europe, subdued stainless demand, elevated imports, and additional drag from ERP implementation and maintenance outages constrain the near-term recovery potential. Although the Americas benefit from firmer prices, demand there also remains soft, which caps the upside to group profitability.

At the same time, Castello acknowledges solid structural positives that support the longer-term story, such as Outokumpu’s cost‑cutting programmes, asset modernisation in Tornio, and the ongoing exit from less competitive German operations, all expected to enhance EBITDA over time. The ferrochrome business remains a key strength, providing resilience and strategic value, including new US investments in low‑emission, critical materials. He also highlights that policy support in Europe, including quotas and tariffs, should start to materially benefit the company from the second half of 2026 onward. Given that these benefits are still some distance away and that he does not foresee incremental capital returns in 2026, he raises the price target but sees the risk‑reward as balanced at current levels, justifying a Hold rather than a Buy rating.

According to TipRanks, Castello is ranked #4419 out of 11984 analysts.