17 January 2007 09:40 [Source: ICIS news]
LONDON (ICIS news)--UBS on Wednesday raised its target share price and 2006-2008 earnings per share (EPS) estimates for BASF on the back of lower tax rate assumptions and a positive outlook for the agrochemicals business.
The target share price was raised to €76 ($98) from the previous €69, UBS analysts said in a note to clients.
Its 2006 EPS estimate was 5% higher than previous forecasts, while estimates for 2007 and 2008 were raised by 13% and 5% respectively.
“We believe that management is increasingly looking to use the dividend as a signal that the company now has lower cyclicality and sustained strong cashflow generation,” the analysts said.
“We still believe that BASF is a cyclical company…at the top of its earnings cycle,” they added.
“We are forecasting a 32% decline in EPS between 2006 and 2008, which we assume to be the trough of the cycle.”
UBS added that this compared with the company’s earnings performance in the last downcycle when earnings declined by 57% in 2001 from a peak in 1998.
“It does worry us that consensus forecasts for the company’s EBIT [earnings before interest and tax] and EPS estimates appear to suggest that the company would be able to retain the peak earnings achieved in 2006 for 2007 and 2008,” the analysts said.
“We would like to point out that oil is a cyclical commodity.”
UBS kept its rating for BASF at Neutral 1. BASF’s share price was at €74.62 at 08:57 GMT on Wednesday, up 0.97% from the previous close.
($1 = €0.77)
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