On Monday, JPMorgan shifted its stance on Akzo Nobel NV (AKZA:NA) (OTC: OTC:AKZOY), upgrading the stock from Neutral to Overweight and setting a price target of EUR70.00. The investment firm's revised outlook is based on several factors that suggest a more positive future for the company.
The analyst pointed out that the consensus cuts are now in the past, with JPMorgan's estimates closely aligned and even indicating a 3-4% upside potential. This optimism is partly due to the expected reversal of a cumulative hyperinflation-related mark-to-market EBIT headwind that was observed in the years 2023 and 2024.
Furthermore, JPMorgan anticipates strong adjusted EBIT growth for Akzo Nobel (AS:AKZO), projecting an increase of 9% annually in 2025 and 2026. This growth is expected to be bolstered by a significant step-up in cost savings, coupled with recent improvements in demand trends.
Another contributing factor to the upgrade is the raw materials price outlook, which appears more favorable than previously feared. The majority of raw materials remain in oversupply, and JPMorgan's commodities team forecasts oil prices to be flat or 16% lower than current levels in 2025 and 2026. Considering that oil-based raw materials account for about half of Akzo Nobel's total raw materials basket, this is a significant point.
The analyst also commended Akzo Nobel's strategic approach to portfolio management, which is deemed sensible. Lastly, the valuation of the company's shares was described as cheap, further justifying the upgrade to Overweight.
JPMorgan's new price target and optimistic view of Akzo Nobel's prospects reflect a positive assessment of the company's potential to navigate through market challenges and capitalize on opportunities for growth and efficiency.
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