Jefferies Upgrades Ashland Inc. (ASH) to Buy, 'Mix Upgrades Amplify Leverage to Better Consumer Confidence'

Jefferies analyst Laurence Alexander upgraded Ashland Inc. (NYSE: ASH) from Hold to Buy with a price target of $126.00 (from $100.00).

The analyst comments "The end of destocking, plus modest sequential demand improvement in consumer markets over the next few quarters, likely suffices for Ashland's margins to normalize, allaying investor concerns over portfolio quality. By 2025, we expect the focus to shift from operating leverage on a potential restock cycle to the longer-term structural improvement implied by recent restructuring and the first significant innovation cycle in decades. We upgrade to Buy from Hold. A Favorable Skew Near-term...: Broad consensus in the chemical industry appears to be that the destocking in consumer channels is done, but that restocking will hinge on a visible and sustained acceleration in demand. This gives Ashland a favorable skew in scenarios for the next several quarters. Given the recent improvements in productivity, the expected increase in utilization rates, the divestiture of the nutraceutical business and re-purposing CMC and MC industrial assets, and favorable mix effects from a stronger new product pipeline, we expect EBITDA margins to step up over the next few years, with an 80bps expansion in 2024, followed by a 300bps expansion in 2025 (on 3% volume growth) and 160bps in 2026 (on 2% volume growth). Incremental margins could range from 50-55% to 85-90% depending on how quickly volumes recover in 2H24-2025, given fixed-cost absorption dynamics. In effect, we expect the company to translate 3% sales growth into 23% EPS growth over the next three years."

For an analyst ratings summary and ratings history on Ashland Inc. click here. For more ratings news on Ashland Inc. click here.

Shares of Ashland Inc. closed at $95.50 yesterday.

You May Also Be Interested In

• Freedom Broker Upgrades Alico Inc. (ALCO) to Buy
• Deutsche Bank Starts Hochtief AG (HOT:GR) (HOCFF) at Hold
• Goldman Sachs Upgrades Clariant AG (CLN:SW) (CLZNY) to Buy