UPDATE: Deutsche Bank Lowers PT to $22 on Kronos Worldwide; Margins Normalizing
Deutsche Bank lowers its price target from $24 to $22 on Hold-rated Kronos Worldwide (NYSE: KRO) as margins are expected to normalize post record Q1 levels.
Deutsche Bank comments, "Kronos shares fell 12% following its Q1 earnings release due, in our view, to the company over-earning in the quarter on sales of lower cost inventory carried over from Q4. With pricing flat QoQ and production costs expected to rise 50-60% in '12 vs ‘11 (due to escalating ore costs), gross margins are likely to compress for the remainder of '12. While we expect TiO2 s/d to remain tight thru at least '14, due to uneven global demand patterns we expect TiO2 to be well supplied intermittently. With a stabilizing TiO2 cycle likely to hold EPS steady and valuation looking fair at 4.5x '12E EBITDA, maintain Hold."
KRO closed at $20.16 on Wednesday.
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Tags: Deutsche Bank