Croda International PLC (LON:CRDA) shares eroded on Tuesday after analysts at UBS warned about potential troubles in the US for the chemicals maker.
The FTSE 100 group supplies materials to the likes of Proctor& Gamble and L’Oréal, but UBS reckons there is growing evidence of a “material slowdown” in the US cosmetics market which could dent sales across the pond.
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“Additionally, there are two other issues to consider for the short-term earnings per share (EPS) growth trajectory:
1) Croda's crop care business could see some adverse fall-out from US weather disruption;
2) the US bio-surfactants plant has not restarted and, whilst idle, losses are accruing to the tune of £2m per quarter.”
Growth to be second-half weighted now
The potential headwinds mean UBS is now relying “less comfortably” on second-half growth in order for its targets to be hit.
The analysts raised their price target to 5,500p (from 5,300p) to reflect slight increases in 2019 and 2020 earnings forecasts.
But with the shares not a million miles off that at yesterday’s close, UBS downgraded Croda to ‘neutral’ from ‘buy’.
Croda shares were down 4% to 4,890p on Tuesday morning.