[ad_1]
Jefferies thinks Quaker Chemical could be on the verge of a breakout in both the near and long term. The metal processing fluid company, which does business as Quaker Houghton, was upgraded to buy from hold on Monday. Jefferies also upped its price target to $146 per share from $115, which implies more than 33% upside from Friday’s $109.65 close. While shares have pulled back more than 22% so far in 2025, analyst Laurence Alexander Quaker expects that to change as conditions improve for steel demand and infrastructure spending increases. Also, the company should be able to pass through any higher raw materials costs it encounters, he said. Alexander estimates for every 1% sales growth Quaker sees, its earnings per share could rise 3.5% to 4.2%, which means shares could rebound quickly during a cyclical recovery. KWR YTD mountain Quaker Chemical stock in 2025. “Another way to frame this is that in a rapid cyclical expansion, a scenario that adds 15% to sales over 2-3 years, we would expect ~33% cumulative profit growth from the sales growth, another ~36% from operating leverage as margins expand to 40%-42% (vs. the longer-term 36%-38% range),” Alexander wrote in a note to clients. “Factoring in ~$15/share from maintaining a 1.5x leverage and ~$25 from cumulative FCF [free cash flow] would support a doubling in the share price with no multiple expansion.” However, over the long term, Alexander expects the stock could triple by 2030. “If Quaker can trade in line with the quality compounder peers, we estimate a 13x-15x multiple would be plausible, this would imply $350-$475/share by 2030, depending on balance sheet flex scenarios, or 3.2x-4.5x the current share price,” the analyst said. According to Alexander, Quaker could see its multiple expand as it leverages its scale advantages and takes advantage of digitalization, automation and integrated analytics. Also, in this scenario, Quaker could increase stock buybacks or make acquisitions to further enhance the stock’s value, he said. However, in a recession scenario, Alexander expects there is the potential for the stock to fall to $90 a share. This would be due to an inability to pass along raw material costs and weaker demand, he explained.
[ad_2]
Source link
