- KMG Chemicals (KMG -0.9%) is downgraded to Sector Weight from Overweight at KeyBanc on valuation after shares have gained ~50% since last November.
- KMG's FQ3 earnings beat and guidance raise sent the stock above KeyBanc's prior $75 price target and now trades at a fair valuation, the firm says, noting the company's multiple of 12x on estimated 2019 EV/EBITDA represents a premium to the average peer group's 10x multiple.
- KeyBanc says KMG's strong stock performance since it initiated coverage in November is warranted, as the company succeeded in transforming to a "higher-quality chemical company," but the competitive landscape has intensified and the electronic chemicals business faces tougher Y/Y comparisons.