Nova Kicks Off 2Q Warnings Season, Rohm and Haas to Meet Expectations

25 June 2001 00:00  [Source: ICB Americas]

From early indications, the second quarter will be no picnic. Nova Chemicals is warning of a wider-than-expected loss on the weakening styrenics market while Rohm and Haas will meet Wall Street expectations of flat sequential earnings.

Nova Chemicals Corp. expects to post a loss of 25 to 30 cents per share in the second quarter versus Wall Street estimates of a 2 cent profit. Last April, the company expected second quarter results to improve over the first quarter loss of 12 cents per share.

Although Nova's olefins/polyolefins business is showing improvement, the company's styrenics business has deteriorated due to poor demand. Goldman Sachs analyst Avi Nash slashed his 2001 EPS estimate from a profit of 40 cents to a loss of 70 cents.

On the positive side, Rohm and Haas Company expects to post second quarter EPS of 27 to 29 cents, essentially meeting Street expectations of 28 cents. The company posted EPS of 29 cents in the first quarter.

While Rohm and Haas is seeing "glimmers of better news" in several areas, including declining raw material costs, "collectively, there is nothing that signals a significant upturn in market demand."

In performance polymers, there are signs that customers are restoring inventory to depleted distribution channels. The coatings segment is seeing seasonal build patterns.

JP Morgan analyst Gil Yang upgraded Rohm and Haas from "hold" to "buy," and raised his 2001 EPS estimate by 5 cents to $1.25. "We expect Rohm and Haas to achieve strong earnings acceleration via cost savings, economic improvement and narrowing price/cost gap in the second half of 2001 and in 2002," he says.

Before the announcements, Wall Street further cut earnings estimates for 2001. Just weeks after lowering estimates earlier this month, Lehman Brothers analyst Sergey Vasnetsov is taking down numbers again.

"We believe that second quarter earnings are going to be even worse than current expectations, as the second leg [down] of the 'W' year comes faster than expected," says Mr. Vasnetsov.

The analyst trimmed his 2001 EPS estimates on Dow Chemical (by 10 cents to 85 cents), Lyondell (by 10 cents to -50 cents), Nova (by 8 cents to -15 cents) and Millennium (by 5 cents to -30 cents).

On the specialties side, Banc of America Securities analyst Mark Gulley trimmed 2001 EPS estimates on Crompton (by 5 cents to 65 cents), Great Lakes (by 10 cents to $1.85), Rohm and Haas (by 10 cents to $1.25) and Praxair (by 10 cents to $3.05).

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