OUTLOOK ‘07: Wall Street unveils top picks

04 January 2007 20:23  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--Wall Street is selecting its top stock picks for 2007, including Cytec Industries and Celanese, analysts said on Thursday.

KeyBanc Capital Markets analyst Michael Sison had the winning pick in 2006 with Albemarle, which racked up an 87% gain, rising from $38.35 to $71.80.

For 2007, the analyst said he likes specialty chemical and aerospace materials maker Cytec Industries, which trades at around $57 (€43)/share.

“Cytec has underperformed recently, but there is a lot of earnings power potential if they can turn around their Surface Specialties division,” Sison said. “Coupled with commercial aerospace exposure, the environment for Cytec looks good.”

The analyst has a price target of $69 on Cytec and expects earnings per share (EPS) to rise by 16% from 3.46 in 2006 to $4 in 2007.

Lehman Brothers analyst Sergey Vasnetsov highlighted Celanese as his top pick for 2007 after having success with the same stock in 2006. Celanese trades at around $25/share.

“Celanese is our best long idea among commodity chemicals,” he said. “The company will continue to capitalise on its strong market share and advantaged cost position in acetic acid and VAM, along with improvements from its restructuring programme.”

Vasnetsov said he expects Celanese’s EPS to rise by 9% from $2.85 in 2006 to $3.10 in 2007.

Deutsche Bank Securities analyst David Begleiter also doubled down on Celanese as his top pick for two years in a row.

“It is mispriced at just 8.9 [times] 2007 EPS versus its differentiated peers at 13-14 times,” said the analyst. “The overhang by the private equity sponsors has been the key issue for Celanese, but Blackstone is now down to just 14% - a negligible position.”

Banc of America Securities analyst Kevin McCarthy also highlighted Celanese as his top pick, with a $29/share price target.

“The company has an attractive hybrid business model, a low-cost position with proprietary technology and the greatest sales concentration in both Asia and Europe,” McCarthy said. “The acetyls chain remains tight and we expect that to remain so through 2008 with an option on 2009 depending on the timing of capacity from China and Saudi Arabia.”

($1 = €0.76)

(Look for the full story on Wall Street’s top picks for 2007 in the 8 January issue of ICIS Chemical Business Americas.)

By: Joseph Chang
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