FocusWall Street names top stock picks for 2008

03 December 2007 16:47  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS news)--Despite a US credit crisis and shaky economic prospects, Wall Street analysts are rolling out their top stock picks for 2008 – the ones that can weather the storm, and even thrive.

Among the favorites are Celanese, Hercules and Rockwood Holdings.

Deutsche Bank analyst David Begleiter is doubling down with Celanese as his top pick for the second year in a row. He has a price target on the stock of $53 expects earnings per share (EPS) to rise 11% from $3.15 in 2007 to $3.50 in 2008.

"We continue to like Celanese due to its technology-based competitive advantages in acetyls, solid supply/demand fundamentals in acetyls for at least the next two years, its strong and growing Asian exposure and attractive valuation of 11x estimated 2008 EPS," said Begleiter.

BB&T Capital Markets analyst Frank Mitsch also highlights Celanese as his top pick with a $46 price target. He expects EPS to gain 13% from $3.18 in 2007 to $3.60 in 2008.

"We like Celanese for its strong position in the acetyls chain generating strong cash flow," said Mitsch. "In addition, the company is best positioned in Asia among our universe. While sales are about equally split between the Americas, Europe and Asia today, Asia is expected to contribute around 50% of overall earnings by 2010."

Credit Suisse analyst John McNulty is partial to Hercules with a price target in the mid-to-upper $20s. He expects EPS to jump 24% from $1.38 in 2007 to $1.71 in 2008.

"We think Hercules will put up solid EPS growth even with an economic slowdown as the company benefits from the ramp-up of its China facilities as well as the year-end insulation of its pension," said McNulty. "Additionally, following their significant debt reduction, the risk profile has been dramatically reduced and this doesn’t appear to be completely factored into the company’s valuation."

UBS analyst Chris Shaw selects Rockwood Holdings as his top pick with a price target of $44. He sees EPS rising 26% from $1.78 ion 2007 to $2.25 in 2008.

"Rockwood should continue to have good earnings momentum as well as some of the highest margins in the space," said Shaw. "Earnings will be supported by the company’s high exposure to the strengthening euro as well as double-digit growth out of key units such as lithium and ceramics."

For further analysis of Wall Street’s Outlook and more top picks, look for the 7 January issue of ICIS Chemical Business.

By: Joseph Chang
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