LXS: Future Earnings Multiples Will Reward Execution Despite Sector Downgrades

Our fair value estimate for LANXESS has been reduced from about €20.30 to roughly €18.66, reflecting a cluster of lower price targets and more cautious views from analysts who now generally expect lower growth and apply a slightly higher required return.

Analyst Commentary

Recent Street research around LANXESS has tilted more cautious, with several firms trimming price targets and highlighting sector headwinds in European chemicals and ingredients.

Bearish Takeaways

Bearish analysts have cut price targets into a €15 to €17 range, which sits below our updated fair value estimate of about €18.66 and signals concern about LANXESS' ability to fully execute on its plans in the current sector backdrop.
The move to an Underweight rating from some analysts reflects a view that risk and reward are not balanced, with questions around earnings visibility and the pace of any potential improvement in profitability.
One research house expresses a negative view on European chemicals and ingredients overall, which weighs on sentiment for LANXESS and suggests that any company specific progress could still be constrained by wider sector pressures.
Preference for other areas such as industrial gases, ingredients and distributors suggests that some analysts see better growth and execution prospects elsewhere, which can limit multiple expansion for LANXESS even if fundamentals stabilize.

Valuation Changes

The fair value estimate was reduced from about €20.30 to roughly €18.66, implying a moderately lower central value for the shares in the model.
The discount rate moved slightly higher from about 7.86% to roughly 8.15%, reflecting a somewhat higher required return applied to future cash flows.
Revenue growth was adjusted down from about 1.09% to roughly 0.82%, pointing to more cautious assumptions around the top-line outlook.
The net profit margin was held broadly unchanged at about 5.22%, indicating no material shift in long-run profitability assumptions in the current model.
The future P/E was trimmed from roughly 6.89x to about 6.44x, suggesting a slightly lower valuation multiple applied to expected earnings.

Strategic portfolio shifts and investment in sustainable, higher-margin segments are expected to boost recurring earnings and broaden LANXESS's addressable markets.
Cost structure optimization, digitalization, and global expansion should support organic growth, greater resilience, and improved cash flow amid evolving market demands.
Rising competition, high energy costs, weak demand, overcapacity, and macroeconomic uncertainty are undermining profitability, efficiency, and long-term earnings visibility.

Catalysts

About LANXESS

Operates as a specialty chemicals company that engages in the development, manufacture, and marketing of chemical intermediates, additives, specialty chemicals, and consumer protection products worldwide.What are the underlying business or industry changes driving this perspective?

Strategic portfolio optimization-including the divestiture of the urethane business, accelerated closure of high-cost, high-CO2 assets, and network consolidation-positions LANXESS to allocate capital toward higher-margin, resilient segments (e.g., specialty additives, consumer protection), which is likely to support margin expansion and more recurring earnings over time.
Focused expansion in areas such as water treatment, personal care, and agrochemical markets, combined with a broad regional footprint and leaner cost structure, is expected to enable LANXESS to capture organic top-line growth and mitigate end-market risk, especially as demand from sustainability-minded sectors increases.
Secular increases in regulation and consumer demand for sustainable materials are accelerating the shift toward green chemicals; LANXESS's ongoing investments in eco-friendly product lines and the closure of high CO2 assets directly target this opportunity, which should help expand its addressable market and support revenue growth and pricing power.
Anticipated stabilization in tariffs and macroeconomic uncertainty, along with impending German government stimulus and infrastructure spending beginning in 2026, creates a setup for volume and revenue tailwinds when industry demand normalizes, with LANXESS well-positioned to supply a rebound due to disciplined working capital and inventory management.
Ongoing portfolio and network optimization, digitalization efforts (including use of AI for efficiency gains), and an enhanced focus on cost containment are expected to deliver further operating leverage, thus improving free cash flow and ROIC even before market conditions materially improve.

LANXESS Future Earnings and Revenue Growth

Assumptions

How have these above catalysts been quantified?

Analysts are assuming LANXESS's revenue will grow by 1.4% annually over the next 3 years.
Analysts assume that profit margins will increase from -2.7% today to 0.2% in 3 years time.
Analysts expect earnings to reach €10.2 million (and earnings per share of €0.11) by about September 2028, up from €-165.0 million today. However, there is a considerable amount of disagreement amongst the analysts with the most bullish expecting €211.1 million in earnings, and the most bearish expecting €-65.7 million.
In order for the above numbers to justify the analysts price target, the company would need to trade at a PE ratio of 277.8x on those 2028 earnings, up from -12.3x today. This future PE is greater than the current PE for the GB Chemicals industry at 22.0x.
Analysts expect the number of shares outstanding to remain consistent over the next 3 years.
To value all of this in today's terms, we will use a discount rate of 7.2%, as per the Simply Wall St company report.

LANXESS Future Earnings Per Share Growth

Risks

What could happen that would invalidate this narrative?

Intensifying competition from Chinese producers, especially in intermediates and additives, is leading to price erosion and market share loss in Europe and Latin America, directly threatening revenue and operating margins over the long term.
Persistently high and structurally uncompetitive energy costs in Germany and Europe, compared to the U.S., are creating a sustained cost disadvantage that may not be fully offset by price pass-through, squeezing net margins and undermining LANXESS's competitiveness.
Weakness and prolonged cyclical troughs in key end-markets-such as automotive, capital goods, construction, and agrochemicals-are leading to depressed demand, short-term order patterns, and production underutilization, all of which place ongoing downward pressure on top-line growth and profitability.
Overcapacity and underutilization at certain production sites, as well as continued adjustment and closures of subscale plants (e.g., Widnes, Hexane Oxidation), highlight risks of asset inefficiency and weak asset turnover, which can erode returns on capital and future earnings.
Macroeconomic and geopolitical uncertainty-including tariff escalations, slow government stimulus deployment, and the threat of further regulatory/lobbying-driven disruptions-are contributing to an unusually wide guidance range and heightening risks to revenue visibility, cash flow stability, and long-term earnings power.

Valuation

How have all the factors above been brought together to estimate a fair value?

The analysts have a consensus price target of €26.786 for LANXESS based on their expectations of its future earnings growth, profit margins and other risk factors. However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €38.0, and the most bearish reporting a price target of just €17.0.
In order for you to agree with the analyst's consensus, you'd need to believe that by 2028, revenues will be €6.4 billion, earnings will come to €10.2 million, and it would be trading on a PE ratio of 277.8x, assuming you use a discount rate of 7.2%.
Given the current share price of €23.58, the analyst price target of €26.79 is 12.0% higher.
We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.

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Disclaimer

AnalystConsensusTarget is a tool utilizing a Large Language Model (LLM) that ingests data on consensus price targets, forecasted revenue and earnings figures, as well as the transcripts of earnings calls to produce qualitative analysis. The narratives produced by AnalystConsensusTarget are general in nature and are based solely on analyst data and publicly-available material published by the respective companies. These scenarios are not indicative of the company's future performance and are exploratory in nature. Simply Wall St has no position in the company(s) mentioned. Simply Wall St may provide the securities issuer or related entities with website advertising services for a fee, on an arm's length basis. These relationships have no impact on the way we conduct our business, the content we host, or how our content is served to users. The price targets and estimates used are consensus data, and do not constitute a recommendation to buy or sell any stock, and they do not take account of your objectives, or your financial situation. Note that AnalystConsensusTarget's analysis may not factor in the latest price-sensitive company announcements or qualitative material.

Analysts Lower LANXESS Price Target and Ratings Amid Mixed Outlook and Valuation Shifts