Goldman Upgrades Chemours To Buy

Goldman Sachs’ Robert Koort upgraded the rating for Chemours Co CC from Neutral to Buy, while raising the price target from $6 to $10. The analyst cited substantial cyclical upside as well as cost controls as the reasons for the revisions.

Since June 2015, Chemours’ shares has declined 70 percent, due mainly to the “the deteriorating TiO2 market, investor aversion to leveraged balance sheets and concerns around its PFOA liabilities,” analyst Robert Koort said.

Catalysts For Chemours

The analyst mentioned that there were signs of the TiO2 market bottoming, while some progress seems to have been made on the PFOA front. He further commented that Chemours’ aggressive cost cutting and asset optimization efforts are likely to boost earnings momentum in 2016.

“The long-awaited turn in TiO2 should allow investors to revisit the substantial cyclical upside potential for CC. Coupled with its profitability enhancements as a newly independent company, we expect earnings to improve meaningfully as 2016 unfolds,” Koort wrote.

The EBITDA estimate for 2016 is at $600mn, which is significantly below “our normalized estimate of $1bn that we believe can become a more meaningful metric for valuation calculations as investors gain confidence that the trough has passed,” the Goldman Sachs report added.

Chemours noted that Chemours had limited debt maturities until 2022, while adding that an earnings recovery could attract investors to “the world’s leading and lowest-cost TiO2 producer.”