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Compass Minerals could be a winner from this year’s cold winter, per JPMorgan. Analyst Jeffrey Zekauskas upgraded the stock to overweight from neutral. He also raised his target price by $2 to $15 per share, which suggests 25.3% upside potential from Tuesday’s close. Compass Minerals has struggled of late, with multiple “business dislocations that have not turned in a positive direction” over the past five years — which have dragged down the stock by around 83% over the period. The company was also fined and sued by the Securities and Exchange Commission for misleading investors. On top of that, it abandoned efforts to become a lithium producer, had quality issues after acquiring flame retardant company Fortress and got rid of its dividend early last year. Most recently, management lowered its earnings guidance for the full year. CMP 5Y mountain CMP 5-yr chart However, Zekauskas believes Compass stands to benefit from an improving balance sheet and cold winter. Compass’ core business is salt for ice and snow management on the roads in the U.S. and Canada, he noted. “Warm weather in October and November led to earnings weakness in the December quarter (1Q:F25) and so a more conservative approach to annual earnings for F2025,” Zekauskas wrote in a note on Wednesday. “January, however, has been an above-average snow month, inventories at depots in the South have been depleted, and weather has been cold across the Midwest and Northeast. The cold weather, should it continue, positions the company well for better earnings later in F2025 and perhaps in F2026,” he added. The analyst also thinks Compass could hit positive free cash flow this year as it brings down its inventories. This could also serve as the foundation for earnings growth in 2026, he added. “Compass was generating negative cash flow as its inventories built up during a two-year period of unseasonably warm weather and it invested in exploring a lithium opportunity. Cash flow and free cash flow is capable of being generated as excess inventories are worked lower and cost positions are improved,” Zekauskas said. Shares climbed more than 4% Wednesday before the bell.
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