BASF: Preliminary Earnings Announcement in Line With Our Outlook As Agriculture Business Recovers

BASF SE, the world's largest chemical company, has released its preliminary earnings results for the full year 2024, and the news is largely in line with our outlook. The company's Agricultural Solutions segment has shown significant recovery, driving overall financial performance. Let's dive into the details and analyze the implications for BASF's stock price and valuation.

Key Takeaways:

1. Sales and Earnings Growth: BASF's sales for the full year 2024 are expected to be €65.3 billion, in line with analyst estimates. EBITDA before special items is expected to be €7.9 billion, slightly below BASF's own forecast range but at the level of analyst consensus. Free cash flow is expected to be €0.7 billion, considerably above analyst consensus and above BASF's forecast range.
2. Agricultural Solutions Segment Recovery: The Agricultural Solutions segment has considerably increased its contribution to EBITDA before special items in the final quarter compared with the same period of the previous year. This positive development was driven by higher volumes, especially of herbicides, and significantly higher price levels.
3. EBIT Miss: EBIT for 2024 is expected to be €2.0 billion, below analyst consensus (€3.2 billion) and below the previous year's figure (€2.2 billion). The main reasons for the deviation from analyst consensus are non-cash-effective impairments, primarily on battery materials in the Surface Technologies segment, as well as restructuring costs in all segments.

Implications for BASF's Stock Price and Valuation:

* The slight miss on EBITDA and the significant miss on EBIT may lead to a downward revision of analyst estimates and a potential decrease in BASF's stock price, as investors may be disappointed with the company's profitability.
* The strong free cash flow generation, however, could be seen as a positive sign by investors, as it indicates that BASF is managing its cash flow effectively despite the challenges in profitability.
* The mixed results may lead to a more cautious stance by investors, with some focusing on the strong cash flow and others being concerned about the weaker profitability.
* The valuation of BASF's stock may be affected by these mixed results, with some investors re-evaluating their positions based on the updated earnings and cash flow data.



In conclusion, BASF's preliminary earnings announcement shows a mixed picture compared to analyst expectations. While the Agricultural Solutions segment has recovered strongly, the company's profitability has missed estimates due to impairments and restructuring costs. Investors should monitor the situation closely and consider the implications for BASF's stock price and valuation. As always, it's essential to stay informed and make investment decisions based on thorough research and analysis.