Dow remains under pressure after Q3 result - HSBC

25 October 2007 16:42  [Source: ICIS news]

TORONTO (ICIS news)--Dow Chemical remains under pressure to take steps to create shareholder value as its shares underperform amid continued strong cashflows, HSBC said on Thursday in a note commenting on Dow’s third-quarter results.


“We believe that a dividend boost, a large share buyback programme or specialty acquisitions to move the earnings mix away from commodity chemicals are possible courses of action,” the bank said in a note to clients.


“We believe that there is enough value in a potential buyout of Dow - in light of the various asset disposal options available - to keep potential bidders interested, particularly if management maintains its reluctance to use its cash efficiently,” it added.


Commenting on Dow’s third quarter, HSBC said the results missed market expectations and cited weakness in the company’s performance chemicals segment, primarily a result of continued slow US housing markets.


Income from Dow’s equity affiliate income also declined as strong contributions from Dow Corning, Equate Petrochemical Co in Kuwait and MEGlobal could not offset the impact of turnarounds at Optimal, lower licensing revenues at Univation and weather-related limitations on gas availability at Compañía MEGA, the bank said.


HSBC rates Dow’s shares “overweight” with a target price of $55.


The stock was down 0.70%, at $43.67, in Thursday morning trading in New York.


By: Stefan Baumgarten
+1 713 525 2653

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