Johnson Matthey PLC (LSE:JMAT) has had its earnings forecasts slashed by analysts at Jefferies due to falling platinum group metal (PGM) prices.
The US bank reduced underlying profit guidance by 8% for the next three years, putting it 5% behind the market consensus.
Ahead of full-year results on 26 May, Jefferies now predicts sales will reach US$4.1bln and pre-tax profits will come in at US$459mln, with the company operating at an 11.2% margin.
The reduction is in line with slowing prices for PGMs most extensively seen in the 62% fall in value for rhodium over the last year.
“PGM prices are the greatest headwind to earnings over the next two years, with rhodium expected to fall a further 10% in 2024/25,” said Jefferies.
Nevertheless, the firm’s clean air division is touted to see improvements in its margins for the first half of the 2024 financial year.
Energy and input costs are also expected to ease, the New York bank said.
Jefferies remains a buyer of the London-based firm despite the earnings downgrade with a price target of £23, offering around a 15% upside to the share’s current value.
Johnson Matthey’s share price fell heavily when it began exiting the battery materials business and has still yet to recover fully.