Kepler Cheuvreux has shifted its stance on Norsk Hydro SA (OTC:NHYDY), moving the stock from a Hold recommendation to Reduce in the wake of the company's Q4 2025 results. The research firm nonetheless nudged its price target higher to NOK73.00 from NOK71.00.
The adjustment to the recommendation accompanies a near 4% reduction in Kepler Cheuvreux's earnings estimates. The firm attributes those downward revisions primarily to a softer outlook for downstream activities and to foreign exchange headwinds. Kepler says those pressures largely offset its more optimistic assumptions for metal and alumina prices.
Kepler highlighted a larger market concern: it sees fundamental downside risk to current London Metal Exchange (LME) aluminum prices because global profitability across the aluminum chain remains elevated. The broker expects the aluminum market to move from a small deficit in 2025 to a surplus beginning in 2026. That anticipated shift underpins a more cautious price trajectory versus present levels and raises the risk that earnings and valuation multiples for Norsk Hydro could compress if LME prices revert.
These moves come even as the stock has delivered strong returns recently. According to InvestingPro data, Norsk Hydro has risen 58.25% over the past year and is trading close to a 52-week high of $9.75. The firm also notes a 41.97% price return over the last six months - a performance backdrop against which Kepler is warning of potential downside should commodity prices weaken.
In contrast to Kepler Cheuvreux's more conservative view, BNP Paribas Exane has taken a bullish stance. The investment bank upgraded Norsk Hydro from Neutral to Outperform and increased its price target to NOK84.00 from NOK67.00. BNP Paribas Exane said its upgrade reflects revised commodity price assumptions, with higher aluminum price expectations anticipated to lift Norsk Hydro's earnings forecasts.
The juxtaposition of these analyst views underscores the sensitivity of Norsk Hydro's outlook to aluminum price assumptions and to downstream performance and currency movements. Market participants should weigh both the risk of price reversion flagged by Kepler and the more favorable commodity-driven scenario put forward by BNP Paribas Exane.
Key points
- Kepler Cheuvreux downgraded Norsk Hydro from Hold to Reduce and raised its price target to NOK73.00 from NOK71.00.
- Kepler trimmed its estimates by about 4% due to a weaker downstream outlook and foreign exchange headwinds, partly offset by higher metal and alumina price assumptions.
- BNP Paribas Exane upgraded the stock to Outperform and increased its price target to NOK84.00 from NOK67.00 based on more bullish aluminum price assumptions.
Risks and uncertainties
- If LME aluminum prices revert from current levels, earnings and valuation multiples for Norsk Hydro could face compression - impacting equity investors and the metals sector.
- Downside revisions tied to a weaker downstream outlook could weigh on company revenues and margins - a risk for industrial and materials sectors exposed to processing and fabrication demand.
- Foreign exchange headwinds identified by Kepler may further dampen reported results, affecting multinational commodity producers and exporters.