Goldman Sachs upgrades Norway Hydro's rating by two levels, with favorable supply conditions boosting support

Investing.com - Goldman Sachs upgraded Norsk Hydro’s (Norsk Hydro) rating from “Sell” to “Buy,” citing improving earnings outlook and a more favorable supply environment for higher-value aluminum products.

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The firm raised its 12-month target price from 69 Norwegian kroner to 120 Norwegian kroner, saying pricing assumptions for downstream aluminum markets are stronger, with higher premiums.

Norsk Hydro’s share price has been rising steadily recently; after climbing steadily in March and early April, it reached the highest level during the review period. As of 07:50 a.m. Eastern Time (11:50 a.m. Greenwich Mean Time), the stock was up 4.8%.

Goldman Sachs said supply shocks related to disruptions in the Middle East could tighten the supply of higher-value products—products used in sectors such as automobiles and aerospace.

The firm estimates that the disruption could cut about 16% of higher-value aluminum supply outside China, shifting market dynamics from being price-led to being supply-led.

Norsk Hydro, one of Europe’s largest integrated aluminum producers, is seen as being well positioned due to its exposure to downstream products with higher profit margins.

According to the report, about 70–75% of its output is higher-value products, with roughly 60% sold to Europe.

Goldman Sachs also raised its earnings forecasts, expecting earnings per share of 9.47 Norwegian kroner in 2026—significantly higher than its prior estimate—driven by higher aluminum prices and rising premium levels.

The firm noted that although demand conditions remain uncertain, especially in downstream segments, supply constraints could support near-term earnings momentum.

Goldman Sachs added that Norsk Hydro’s integrated operations, established customer relationships, and planned capacity increases could help it respond to the current market environment better than its peers.

Goldman Sachs said risks to the outlook include aluminum prices falling below expectations, cost inflation, and continued weakness in downstream demand.

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