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Taking Stock of W.R. Grace's Leverage Situation after 2Q17

PART:
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Part 3
Taking Stock of W.R. Grace's Leverage Situation after 2Q17 PART 3 OF 5

What’s Wall Street’s View of W.R. Grace?

Analysts’ consensus on W.R. Grace

The number of analysts tracking W.R. Grace (GRA) has decreased to 13 from 14 in August 2017. About 69.0% of them have recommended a “buy” for the stock, 31.0% have recommended a “hold,” and none of them have recommended a “sell.”

What&#8217;s Wall Street&#8217;s View of W.R. Grace?

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Analysts’ consensus suggests a 12-month target price for GRA of $82.17, implying a return potential of 13.6% from the closing price of $72.36 on September 20, 2017. Analysts’ mean target price for GRA has risen from $81.77 in August to the current target price of $82.17.

Analysts are recommending a ‘buy’: Do we know why?

GRA’s 2Q17 earnings beat analysts’ estimates. The company maintained its adjusted EPS (earnings per share) guidance for fiscal 2017 of $3.30–$3.45, an increase of 6.0%–11.0% over the previous year. GRA expects sales to rise 3.0%–4.0%. It has repurchased 426,000 shares valued at approximately $30.0 million from its $500.0 million share repurchase program. The trend could continue in the coming quarters and add more value to the remaining shareholders in the future. As a result, analysts are recommending either a “buy” or a “hold” for GRA stock.

Individual recommendations and target prices

  • KeyCorp (KEY) has rated W.R. Grace a “buy” and has recommended a target price of $77. That implies a return potential of 6.4% from the closing price of $72.36 on September 20, 2017.
  • Goldman Sachs (GS) has rated GRA a “neutral” with a target price of $83. That indicates a return potential of 14.7% over the closing price of $72.36 on September 20, 2017.
  • Credit Suisse (CS) views GRA as a “buy” with a target price of $82. That implies a return potential of 13.3% from the closing price of $72.66 on September 20, 2017.

Investors can indirectly hold GRA by investing in the iShares US Basic Materials (IYM), which has invested 0.80% of its portfolio in W.R. Grace as of September 20, 2017.

In the next part, we’ll look at GRA’s latest valuations compared to its peers.

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