On Thursday, BMO Capital Markets updated its outlook on shares of Ingevity Corp (NYSE:NGVT), increasing the price target to $47.00 from the previous $40.00, while maintaining a Market Perform rating on the stock. The adjustment comes as Ingevity approaches what is described as a turning point, particularly within its Performance Chemicals (PC) business.
The analyst believes that the PC business will hit a definitive bottom in 2024, with a recovery anticipated to begin in 2025. Despite challenging automotive volumes, Ingevity's Performance Materials (PM) segment has shown resilience. The company's ability to manage pricing and efficiency has led to strong earnings, and the expectation is that margins exceeding 50% will continue.
A strategic review of Ingevity's portfolio is also underway, providing the company with various options moving forward. This review is a critical factor as it adds a layer of optionality to Ingevity's business strategy.
Ingevity's stock has seen a significant rise, increasing by 20%, although there are still uncertainties regarding the extent of the PC segment's EBITDA lift in 2025 and the appointment of a permanent CEO. Despite these uncertainties, BMO Capital Markets has improved its risk/reward assessment of the stock, prompting the price target update.
The analyst's commentary underscores a cautious yet optimistic stance, suggesting that while the firm recognizes the potential for Ingevity's growth and improved financial performance, it advises a watchful approach as the company navigates its upcoming challenges and opportunities.
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