UPDATE: UBS Downgrades Chemours (CC) to Sell

UBS downgraded Chemours (NYSE: CC) from Neutral to Sell with a price target of $9 (unchanged). Analyst John Roberts noted bearish sentiment on commodities, China and currency, and he pointed out peers are down 6-20% while Chemours is unchanged since early August.

"Since the company reported earnings on August 6, declines in peers have ranged from 6% for HUN & OLN, to 18% for TROX, and 22% for KRO. We reiterate our $9 price target for CC, which reflects 18% downside from current levels. Given the potential downside to our PT, we are reducing our rating to Sell from Neutral as we believe underlying TiO2 fundamentals will remain challenged in the near and medium terms. Although many producers are near break-even (suggesting a bottom), we see no meaningful recovery in sight given overcapacity and China that will put a lid on pricing," said Roberts.

"We believe China accounts for approximately a third of global capacity for commodity Tio2 pigment (an opacifier used in paints, paper, plastics, etc.). Many commodities have been declining recently on concern about decelerating global demand. Chemours is a large exporter of pigment from the U.S., so there is transactional currency risk in addition to the normal translational risk. As TiO2 operating rates in China are below 75%, we believe any signs of market improvement will likely trigger higher production in China," continued the analyst.

Roberts added, "Chemours has not yet said what its continuing dividend will be, but we believe it will be substantially reduced from the initial $0.55/sh. quarterly dividend set by former parent DuPont. Chemours also has a major project starting up in Mexico next year, & it remains unclear how quickly the company will bring new capacity into an already oversupplied market. CC's financials remain challenged and most of the earnings improvement going forward is based on cost restructurings which, if they fail to fully flow thru the bottom line, could present downside risk to estimates."

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

Shares of Chemours closed at $10.98 yesterday.

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