On Thursday, BMO Capital adjusted its outlook on Ryerson Holding (NYSE:RYI), a metals distributor and processor, citing ongoing margin pressures that influenced a first-quarter miss and a softer-than-expected future outlook. The firm lowered its price target on the company's stock to $28 from the previous $33 while maintaining a Market Perform rating.
The revision follows Ryerson's recent report, which did not meet expectations for the first quarter of 2024. The company also presented a cost-cutting program aimed at addressing its financial challenges. Despite these measures, BMO Capital expressed concerns over the company's higher-than-anticipated costs. This prompted the firm to revise its estimates and target price downward.
In addition, Ryerson's capital expenditure (capex) for the year 2025 came in lower than expected. While this is generally a positive sign, indicating potential savings and more focused spending, BMO Capital remains cautious. The firm acknowledges that Ryerson has improved its financial and operational standing in recent years but notes that current cost-related challenges and limited free cash flow (FCF) generation in the near term warrant a cautious stance.
The analyst from BMO Capital highlighted that despite the positives from the cost-cutting program and lower capex, the need to adjust estimates is driven by costs running significantly above their expectations. This adjustment reflects a careful approach to the near-term financial outlook for Ryerson.
In summary, BMO Capital's revised price target for Ryerson Holding reflects a balance between recognizing the company's past improvements and the current financial headwinds it faces. The Market Perform rating indicates a neutral expectation for the stock's performance in the market.
InvestingPro Insights
Following BMO Capital's revised outlook on Ryerson Holding (NYSE:RYI), examining the company through the lens of InvestingPro data and tips can provide additional context for investors. Ryerson's aggressive share buyback strategy and consistent dividend raises over the past three years, as noted in InvestingPro Tips, suggest a management confident in the company's value. Additionally, the stock's current oversold status according to RSI indicators and trading at a low revenue valuation multiple could signal potential for investors.
Real-time data from InvestingPro highlights a market capitalization of 801.14M USD and a P/E ratio of 9.46. These metrics, coupled with a strong dividend yield of 3.03% and recent dividend growth of 10.29%, underscore the company's efforts to deliver shareholder value. Moreover, the company's share price has been significantly impacted over the last week, month, and three months, with a one-week price total return of -20.19% and a one-month price total return of -24.66%, potentially offering an attractive entry point for investors considering the long-term value.
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