Citi has revised its price target for UPM-Kymmene OYJ (UPM: FH) (OTC: UPMKY), a global leader in the paper industry.
The new price target is set at EUR29.00, reduced from the previous target of EUR31.50. Despite this change, the firm maintained a Neutral rating on the stock.
The adjustment comes after UPM-Kymmene's shares dropped by 3% following a profit warning and a pre-released third-quarter earnings before interest and taxes (EBIT) that missed estimates by 23%.
The analyst from Citi noted that the sentiment towards the company had been negative due to significant declines in pulp prices in the weeks prior to the announcement.
According to the analyst, weak consumer end markets have impacted all of UPM's business segments, contributing to the third-quarter miss. This trend suggests a stall in recovery as the initial phase of restocking ends. However, the Communication Papers segment was an exception, likely benefiting from lower pulp input costs.
In response to the current market conditions, Citi has reduced its estimates for UPM's Fibres division, attributing the decision to lower pulp prices. Nevertheless, the firm anticipates a price recovery in the first half of 2025.
Estimates for Raflatac and Specialty Papers have also been decreased due to weak demand. Contrastingly, short-term forecasts for Communication Papers have been increased, reflecting the advantage of lower pulp input costs.
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