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Investing.com -- JP Morgan downgraded Orion to “Neutral” from “Overweight” and cut its price target to $12 from $18 given the reduced prospects for valuation multiple expansion amid economic uncertainty.
The brokerage left its earnings forecasts unchanged but said the relative valuation gap between Orion and its closest peer, Cabot Corp (NYSE:CBT), has narrowed substantially.
Orion was trading at a 3-3.5x EBITDA multiple discount to Cabot last year, that gap has since contracted to 1.3x.
“We think that multiple expansion at this juncture is less likely,” JP Morgan wrote, noting that valuations across the carbon black sector have normalized.
Orion currently trades at 5.2x estimated 2025 EBITDA and 4.6x for 2026, compared to Cabot’s 6.0x.
JP Morgan said the company still offers reasonable value, highlighting a projected free cash flow yield of roughly 15.5% in 2026, aided by sharply lower capital expenditures following the completion of its La Porte battery materials expansion project.
But the firm warned that broader economic uncertainties may limit investor appetite for further re-rating.
Orion, a key supplier of carbon black for tires and specialty applications in plastics and coatings, is expected to see stabilization in its rubber black segment next year after two years of declines. Volumes in its specialty segment are also projected to recover.
Despite those operational positives, JP Morgan said the stock’s current valuation already reflects its improved fundamentals, leaving little room for upside.
We believe the valuation gap between Orion and Cabot is within a reasonable range, the firm wrote, adding that it now sees limited opportunity for multiple expansion.
