BMO Capital has revised its price target for Element Solutions (ESI, Financial), lowering it from $34 to $30 while maintaining an Outperform rating. The adjustment reflects BMO Capital's cautious approach due to an uncertain economic environment.
Despite this revision, Element Solutions has demonstrated a robust performance since the year's start, with earnings surpassing expectations. The company's management has reaffirmed its 2025 guidance, indicating confidence despite potential macroeconomic challenges and tariff-related issues.
The decision to lower the price target stems from concerns over the unpredictable economic landscape, although the company's resilience against these factors has been noted by analysts.
Wall Street Analysts Forecast
Based on the one-year price targets offered by 13 analysts, the average target price for Element Solutions Inc (ESI, Financial) is $28.11 with a high estimate of $31.44 and a low estimate of $23.00. The average target implies an upside of 36.93% from the current price of $20.53. More detailed estimate data can be found on the Element Solutions Inc (ESI) Forecast page.
Based on the consensus recommendation from 13 brokerage firms, Element Solutions Inc's (ESI, Financial) average brokerage recommendation is currently 1.9, indicating "Outperform" status. The rating scale ranges from 1 to 5, where 1 signifies Strong Buy, and 5 denotes Sell.
Based on GuruFocus estimates, the estimated GF Value for Element Solutions Inc (ESI, Financial) in one year is $21.41, suggesting a upside of 4.29% from the current price of $20.53. GF Value is GuruFocus' estimate of the fair value that the stock should be traded at. It is calculated based on the historical multiples the stock has traded at previously, as well as past business growth and the future estimates of the business' performance. More detailed data can be found on the Element Solutions Inc (ESI) Summary page.
ESI Key Business Developments
Release Date: February 19, 2025
- Adjusted EBITDA: Grew 13% in constant currency to a record $535 million for the full year 2024.
- Free Cash Flow: Record $294 million for the year, with $116 million generated in the fourth quarter.
- Net Sales Growth: Increased 6% organically in Q4, with Semiconductor Solutions up 19% and Circuitry Solutions up 10%.
- Full Year Organic Sales Growth: 4%, driven by a 7% increase in the Electronics business.
- Adjusted EBITDA Margin: Improved 120 basis points on a constant currency basis for the full year.
- Semiconductor Solutions Revenue: Exceeded $300 million for the first time, with a 5-year CAGR of 14%.
- CapEx: $68 million spent in 2024, with an expectation of $65 million in 2025.
- Net Leverage: 2.8x at year-end, with a pro forma net leverage of 2.3x if the Graphics transaction had closed as of January 1, 2024.
- FX Headwind: $12 million year-on-year impact on adjusted EBITDA and $0.03 on adjusted EPS.
- 2025 Adjusted EBITDA Guidance: High single-digit growth at the midpoint of the range, with Q1 expected to be approximately $125 million.
- 2025 Adjusted EPS Guidance: Approximately $1.40, excluding any benefit from capital allocation.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Element Solutions Inc (ESI, Financial) delivered record adjusted EBITDA of $535 million in 2024, growing 13% in constant currency.
- The company achieved a record free cash flow of $294 million, converting over 50% of adjusted EBITDA to free cash flow.
- ESI outperformed its markets by penetrating fast-growing niches in the electronics industry, particularly in Semiconductor and Circuitry Solutions.
- The sale of Macdermid Graphics Solutions for $325 million is expected to enhance the company's portfolio and improve growth and margins.
- ESI's balance sheet is strong, with net leverage at 2.8x and no debt maturities until 2028, providing substantial capacity for capital deployment.
Negative Points
- The company faced a $12 million year-on-year headwind to adjusted EBITDA due to foreign exchange translation.
- Industrial and Specialty segment sales declined 1% year-over-year, with soft European industrial end markets impacting performance.
- Higher pass-through metals in the assembly business generated an 80 basis point headwind to company margins.
- The sale of Graphics Solutions is expected to impact adjusted EBITDA by approximately $30 million in 2025.
- Potential tariffs and uncertain global industrial production pose risks to the company's 2025 outlook.
