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Titanium dioxide producer Tronox should soar on the back of near- and long-term tailwinds, according to BMO Capital Markets. The bank upgraded the stock to outperform from market perform and boosted its price target to $18 from $11. This implies that Tronox stock could rally more than 32% from its Friday close. Tronox is a vertically integrated producer of titanium dioxide. The pigments derived from this compound add brightness and durability to everyday items such as inks, plastics, paper, paints, coatings and other products. Shares of Tronox are up 4% this year, but 2024 should mark an inflection point for Tronox, according to analyst John McNulty. TROX YTD mountain TROX ytd chart He sees several catalysts ahead for Tronox, including a supportive demand environment for the titanium dioxide market leading to “sequential price increases as the year progresses,” he wrote. At the same time, the costs of higher-priced inventory should begin to abate in the second half of next year, further helping to push earnings up. Overall, this should lead to the company's balance sheet improving next year. “While the year may not start off particularly strong (as high costs still need to work through the P & L in 1H), we see 2024 EBITDA inflecting higher in 2024 and returning to a stronger backdrop in 2025,” he wrote. “This recovery driving significant cash flow that will derisk the balance sheet should all help to drive TROX's stock higher over the next 12-months.” In the longer run, McNulty sees growth opportunities for Tronox to mine and separate rare earth elements. The company has already taken its first step forward into the industry by building a facility to refine such elements. On Monday, shares were up more than 4%.
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