Croda Shares (LON: CRDA) Slide as Jefferies Downgrade Compounds Concerns

Croda International shares (LON:CRDA) experienced a further decline today following a downgrade from Jefferies, adding to existing pressures from previous negative assessments and challenging financial results. The specialty chemicals company is facing headwinds as analysts express concerns about earnings recovery and macroeconomic uncertainties.

Today, Croda shares are down 3.32%, bringing the year-to-date decline to 19.82%. This negative momentum reflects a broader reassessment of the company's prospects by the investment community.

Jefferies analyst Chris Counihan lowered the rating on Croda to ‘Hold' from ‘Buy,' also reducing the price target to 3,000 GBp from 3,100 GBp. The rationale behind this downgrade centers around the difficulty in identifying sources of earnings support until 2026. Jefferies notes that Croda's strategy of increasing volumes to improve utilization rates may delay clarity on earnings until late 2026, a prospect that has dampened near-term sentiment.

This downgrade follows a similar move by Goldman Sachs earlier in the month, who cut Croda to ‘Sell' from ‘Neutral.' Goldman Sachs cited increasing macroeconomic risks, including heightened trade tensions and rising recession risks, as factors contributing to a weaker outlook for the chemical sector. Consequently, Goldman Sachs reduced its adjusted EBITDA estimates for Croda for 2025 and 2026 by 11% and 9%, respectively.

However, not all analysts share this bearish outlook. Barclays upgraded Croda to ‘Overweight' from ‘Equalweight' in late September, despite lowering the price target to 3,100 GBp from 3,600 GBp. This upgrade was motivated by the significant decline in Croda's share price from its peak in late 2021 and the entry of activist investor Standard Latitude, potentially catalysing more decisive strategic actions.

Price Targets

Croda's financial performance in the first half of 2025 showed an adjusted profit before tax of £138 million, slightly above analyst expectations. However, weaker cash flow and rising debt levels led to a share price decline of over 4% following the announcement. The company maintained its full-year guidance, but the financial strain raised concerns among investors.

Earlier in the year, Croda announced a cost-savings plan targeting £25 million in savings for 2025, designed to address falling margins and a drop in annual sales. The company's 2024 results revealed an adjusted pre-tax profit of £273.1 million, down 11.6% from the previous year, with the adjusted operating margin decreasing to 17.2% from 18.9%.

The contrasting analyst opinions highlight the uncertainty surrounding Croda's future. While some see potential for a turnaround driven by strategic initiatives and cost-cutting measures, others are concerned about the impact of macroeconomic headwinds and delayed earnings recovery.