On Thursday, UBS analysts downgraded Cie de Saint-Gobain (SGO:FP) (OTC: CODYY) stock from Buy to Neutral, while slightly increasing the price target to EUR92.00 from EUR91.00. The revision follows a period of strong performance in 2024, which led to a re-rating of the shares. UBS's analysis suggests that the potential for further upside is now more limited, prompting the change in rating.
The adjusted price target represents a marginal increase, reflecting a belief that there may still be some room for a limited re-rating. However, UBS cautions that the current price-to-earnings (P/E) ratio of 12-13 times may already capture much of the stock's value. The firm notes that, while there is some potential for an increase in the stock's value, it is expected to be modest.
UBS has expressed concerns about the impact of rising interest rates on growth expectations, particularly in the residential end markets where Saint-Gobain operates. This economic factor could potentially dampen the momentum in the company's earnings. According to UBS, the likelihood of positive earnings momentum for Saint-Gobain appears low in the current environment.
The firm's forecast for Saint-Gobain's operating income is slightly below the consensus, with a 1% difference. More notably, UBS's projection for earnings per share (EPS) is 5% below the consensus, indicating a more cautious stance on the company's profitability in comparison to the broader market expectations. This outlook has influenced the decision to downgrade the stock rating despite the nominal increase in the target price.
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