TD Cowen Downgrades Mercer International Inc. (MERC) on Leverage Concerns Despite Pulp Market Stabilization

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On January 21, TD Cowen downgraded Mercer International Inc. (NASDAQ:MERC) to Sell from Hold and raised its price target to $2.25 from $2, citing high leverage and expected negative free cash flow despite pulp markets approaching a cyclical floor. The firm believes the recent share price rebound appears difficult to justify given the limited near-term deleveraging pathways.

During its third-quarter 2025 earnings call, Mercer International Inc. (NASDAQ:MERC) reported negative EBITDA of $28 million, including a $20 million non-cash inventory impairment, compared to negative EBITDA of $21 million in the prior quarter. Management outlined plans to deliver $30 million in cost savings and reliability improvements by the end of 2025 as part of a broader initiative targeting $100 million in profitability improvement by the end of 2026. The company’s mass timber segment has built an $80 million order backlog and is expected to see improved performance in 2026 as markets recover. While near-term financial pressures remain, Mercer’s cost-reduction initiatives, operational leverage to a pulp recovery, and growing engineered wood backlog provide upside potential if pricing stabilizes, offering speculative investors exposure to a cyclical rebound opportunity.

Mercer International Inc. (NASDAQ:MERC) operates through its two segments: Pulp and Wood Products to manufacture northern bleached softwood kraft pulp and operates pulp and wood product facilities across multiple regions. The company was founded in 1968 and is headquartered in Vancouver, Canada.

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