On Thursday, BMO Capital Markets adjusted its price target on shares of Martinrea International (MRE:CN) (OTC: MRETF), a leading auto parts manufacturer. The firm lowered the target to C$13.00 from the previous C$15.00 while keeping an Outperform rating on the stock.
The revision followed Martinrea's third-quarter earnings, which, according to BMO Capital, were better than anticipated for the North American segment. Despite the positive note on earnings, the firm noted that the increase in the projected tax rate has led to a decrease in earnings per share (EPS) estimates for the company.
BMO Capital's analysis indicates that Martinrea's management projections for the fourth quarter of 2024 and the first half of 2025 might not meet market expectations regarding margins. This outlook seems to have been factored into the stock's performance today, with a significant 11% decline.
The price target adjustment also reflects a change in the target multiple, which has been reduced to 3 times from 3.3 times the firm's revised earnings before interest, taxes, depreciation, and amortization (EBITDA) estimate for 2025. This modification in the valuation multiple is in line with the updated EPS forecast and the market's reception of the company's forward-looking statements.
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