On Thursday, RBC Capital initiated coverage on Forterra (NASDAQ:) Plc (FORT:LN) (OTC: FTTRF) stock, a prominent UK clay brick manufacturer, with an Outperform rating and a price target of GBP2.10. The new assessment reflects a bullish outlook on the company’s potential for recovery and growth despite recent challenges.
Forterra, recognized as the UK’s second-largest producer of clay bricks, primarily serves volume housebuilders. The company experienced a management shift in 2023 when a new CEO stepped in amid a cyclical downturn and an increase in leverage.
The firm now aims to restore its earnings back to the levels seen in 2022 while also reaping the benefits of its nearly completed £135 million capital expenditure aimed at growth.
RBC Capital’s analysis suggests that Forterra’s strategic efforts could lead to significant returns, with base and upside scenarios projecting approximately 30% and 70% returns, respectively. This is based on an anticipated adjusted earnings per share (EPS) compound annual growth rate (CAGR) of 41% from the estimated 2024 to 2028.
The Outperform rating signifies confidence in Forterra’s ability to outpace the general expectations of the stock market. The price target of GBP2.10 signals the firm’s belief in the potential value of Forterra’s shares, which is underpinned by the company’s investment in expansion and the expected positive impact on earnings.
This optimistic stance from RBC Capital comes at a time when Forterra is navigating through the aftermath of a challenging period, with the goal of achieving a robust financial performance in the coming years. The company’s focus on returning to its previous earnings levels while driving incremental returns post-investment is central to this outlook.
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