Dow to be debt-free by end-2008 - JP Morgan

17 September 2007 14:17  [Source: ICIS news]

MUMBAI (ICIS news)--JP Morgan expects Dow Chemical to be free of net debt by the end of 2008 as it generates excess cashflow on the basis of deferred tax benefits, it said on Monday.

The bank's brokerage said it expects the US-based firm to generate cashflows of $7bn-8bn (€5.04bn-5.76bn) during the next two years versus a net debt of $6.6bn as on 31 December, 2006.

"We believe deferred tax benefits could boost Dow’s free cashflow by more than $1bn in 2007-2008," the brokerage said.

The brokerage has an "overweight" rating on the company's share and a stock price target of $48/share.

JP Morgan said a waning in cyclical margin strength or a diminished outlook for economic growth could lead to reduced expectations for earnings per share (EPS) growth and an underperforming stock price.

Dow and Monsanto’s recent agreement to market corn seems unlikely to make much of a financial difference, given Dow’s 3% share in the US corn seed sector, the brokerage said.

Shares of the company last closed nearly unchanged at $41.98 on the New York Stock Exchange.

($1 = €0.72)

By: Isha Jha
+65 6780 4359

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