Goldman Sachs’ Robert Koort downgraded the rating on W. R. Grace & Co GRA from Buy to Neutral, with a price target of $77.
Upside Potential
While mentioning that more consumer-oriented and deep cyclical companies in Goldman Sachs’ coverage had more upside, Koort pointed out that W. R. Grace had 8 percent upside potential to its current valuation, in line with the average of 7 percent for the coverage universe.
Price Hikes
Koort also believes that the company could “gain pricing traction in its flagship catalysts business as soon as 2Q2016.”
“We continue to recognize the merits of GRA as the largest and purest play on the oligopolistic FCC catalyst industry following the recent spin of its construction chemicals and packaging businesses,” the analyst said.
However, the analyst also noted that the 2016 guidance was below expectations. Koort believes that the guidance was conservative, given that it does not include any contribution from FCC catalysts pricing.
The price hikes could in fact take a couple of years to be fully implemented.
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