On Friday, BMO Capital Markets adjusted its outlook on shares of Dorel Industries, a company listed on both the Toronto Stock Exchange (DII/B:CN) and the OTC market (OTC: DIIBF). The firm's analyst, Stephen MacLeod, reduced the price target on Dorel Industries to C$5.00 from the previous C$7.00, while maintaining a Market Perform rating on the stock.
The adjustment followed Dorel Industries' third-quarter earnings report, which did not meet expectations. The company's Dorel Juvenile division performed as anticipated, but Dorel Home's results fell significantly short, influenced by a challenging consumer environment.
The company has announced plans to undertake decisive measures to restructure the Home segment and aims to achieve profitability by the year 2025, with further details to be disclosed towards the end of 2024.
Dorel Juvenile's earnings are expected to continue improving. However, the analyst pointed out that the potential sale of the Juvenile division, which could be a near-term event, is unlikely to occur without stabilized earnings and a clear picture of sustainable margin levels for the division.
In light of the absence of definite plans regarding the sale and considering the underperformance of the Home division, the analyst believes that the limited visibility on the company's earnings will constrain any potential upside for Dorel's stock.
The company's strategic efforts to address the issues in the Home segment and improve profitability over the next few years are underway, but the immediate impact on the stock's performance appears to be muted by current challenges.
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