JP Morgan cuts Dow Chemical targets on tough 2009 outlook

02 January 2009 19:22  [Source: ICIS news]

Dow 2009 outlook downgradedTORONTO (ICIS news)--JP Morgan on Friday cut its target price and 2009 earnings estimate for Dow Chemical because of pressure in the company’s basic plastics segment.

The bank cut the target for Dow’s shares by $5 to $15 and it reduced the earnings per share (EPS) estimate by 50 cents to $1.50.

Dow’s shares were up 1.2% to $15.27 on the New York Stock exchange.

“We project that Dow’s basics plastics segment is likely to face pressures in 2009 related to lower product pricing and lower estimated cash margins,” JP Morgan said in a research note.

“Additionally, we believe that lower projected operating rates will contribute to poor fixed cost absorption,” it added.

By contrast, JP Morgan expects that Dow’s agricultural sciences segment to generate modest sales growth and greater profits in 2009, it said.

The bank maintained its 2008 fourth-quarter EPS estimate of 34 cents and its full-year 2008 estimate of $2.65.

Commenting on speculation that Dow may try to seek better terms for its pending acquisition of Rohm and Haas after Kuwait withdrew from the proposed K-Dow joint venture, JP Morgan said this was not likely to be successful.

“It is difficult to envision clearly how Dow can reach better terms with Rohm,” the bank said.

“There are no issues of possible material adverse events or solvency issues as in the case of Huntsman,” it said.

“The stress of the transaction is not a matter of Rohm and Haas but of the pressures of the global slowdown, commodity overcapacity, and the frozen and expensive character of the credit markets,” the bank said.

Competition authorities in the US and Europe were likely to approve the deal soon given the relatively small extent of the business overlap, the analysts added.

($1 = €0.71)

For more on Dow Chemical and Rohm and Haas visit ICIS company intelligence
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By: Stefan Baumgarten
+1 713 525 2653



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