Compass Minerals Downgraded to Underweight by JPMorgan.

Compass Minerals was downgraded to Underweight from Overweight at JPMorgan, with a price target of $18, after the company announced winter salt pricing would be up 2%-4%. JPMorgan says Compass will not be a meaningful generator of free cash flow in fiscal 2026. The firm recommends owning agricultural companies with larger fertilizer exposure, such as Nutrien and Mosaic.

JPMorgan has downgraded Compass Minerals International (CMP) to Underweight from Overweight, with a new price target of $18, following the company's mixed third-quarter results and outlook for winter salt pricing. The investment bank cited concerns about the company's ability to generate meaningful free cash flow in fiscal 2026.

Compass Minerals reported better-than-expected revenue for its fiscal 2025 third quarter, with revenue reaching $214.6 million, up 5.8% year-over-year. However, the company's adjusted loss per share of -$0.39 missed analyst estimates of -$0.01 [1]. Despite the earnings miss, Compass Minerals anticipates improvements in pricing moving forward.

The company's salt business saw a 4% increase in sales volumes and a 10% rise in adjusted EBITDA to $45.8 million. The Plant Nutrition segment swung to an operating profit of $5.2 million from a loss of $1.4 million a year earlier. However, the company's consolidated net loss for the quarter was $17 million, compared to a net loss of $43.6 million in the prior year period [2].

JPMorgan cited weaker EBITDA outlook and operational progress in the Plant Nutrition business as reasons for the downgrade. The investment bank expects Compass Minerals to report approximately 6% lower EBITDA in fiscal year 2025 compared to fiscal 2024, with estimates of $194 million versus $206 million previously [3].

The company's stock price fell 10% in the previous session but rebounded to rise by 0.9% on Wednesday. Despite the downgrade, Compass Minerals has been a strong generator of free cash flow in fiscal 2025 through working capital benefits from inventory reduction. The company expects to reduce its net leverage from 4.5x at the end of fiscal 2024 to 4.1x by fiscal year-end 2025, with potential for approximately 17% EBITDA growth to $227 million in fiscal 2026 [4].

JPMorgan recommends owning agricultural companies with larger fertilizer exposure, such as Nutrien and Mosaic, as an alternative investment.

References:
[1] Investing.com - Compass Minerals International Inc. CMP Q3 Earnings Report
[2] Reuters - Compass Minerals International Falls After J.P.Morgan Double Downgrades to Underweight
[3] Yahoo Finance - Compass Minerals International Inc. CMP Q3 Earnings Report
[4] Benzinga - Top Downgrades for Wednesday