BMO Capital analyst Matt Murphy maintained a Hold rating on Nexa Resources SA (NEXA – Research Report) yesterday and set a price target of $6.00.
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Matt Murphy’s rating is based on several key considerations. Nexa Resources SA experienced a slight operational miss, with production declining due to adverse weather conditions and higher unit cash costs resulting from lower by-product sales. Despite these challenges, the company’s operating cash flow before changes in working capital slightly exceeded expectations. However, a significant unfavorable shift in non-cash working capital led to increased net debt levels, which now stand at $1.5 billion, equating to a 2.1x net debt to trailing EBITDA ratio.
Additionally, while the adjusted EBITDA was in line with estimates, the company faced a substantial free cash flow miss, largely due to negative changes in working capital. Zinc production and sales were consistent with expectations, but costs were higher than anticipated. Given these factors, along with the company’s relatively low-margin and low-growth portfolio, Murphy maintains a Hold rating, expecting slight improvements in operating cash flow to aid in reducing leverage over time.
Murphy covers the Basic Materials sector, focusing on stocks such as Agnico Eagle, Newmont Mining, and Nexa Resources SA. According to TipRanks, Murphy has an average return of 19.8% and a 69.60% success rate on recommended stocks.
In another report released on April 15, Point72 Asset Management, L.P. also initiated coverage with a Hold rating on the stock with a $6.00 price target.