Jefferies downgraded Fuchs to Hold from Buy, warning that factors behind the German lubricant maker’s strong performance in 2026—including tight raw-material supply, pricing power and market-share gains—could become less supportive next year.
The broker reduced its price target for Fuchs preference shares to €46 from €48 and for ordinary shares to €42 from €43. The changes followed a strong third quarter and an increase in the company’s full-year guidance.
Jefferies said Fuchs delivered solid operational performance even as volumes eased from their second-quarter peak. Pricing contributed more to third-quarter growth, while cost discipline helped improve operational leverage.
However, the company’s improved outlook comes amid continuing shortages of Group III and Group IV base oils. Jefferies said those supply constraints had supported pricing discussions and customer wins. Fuchs also gained business in 2026 from customers looking for alternative suppliers, with some of the additional sales secured under multi-year contracts.
The broker expects those customer gains and continued pricing to support growth in 2027, but said the combination of scarce supply, higher prices and additional market share would be difficult to reproduce as supply normalises. Fuchs management expects first-half pre-buying effects to have fully unwound by year-end and forecasts a return to more typical historical volume growth next year.
Jefferies noted limited visibility over customer ordering at year-end, while October trading was broadly unchanged from the third quarter. It said its concerns increasingly relate to valuation and risk-reward rather than Fuchs’ operational performance.
The shares trade at about 16.3 times estimated 2027 earnings, close to the three- and five-year average of 16.1 times, according to Jefferies. The broker said this leaves limited room for further valuation expansion, while the company’s underlying growth opportunities—including customer contracts, geographical expansion and demand linked to electrification and sustainability—remain intact.
Sources: Investing.com News.