HSBC cuts Dow Chemical after 'very disappointing' Q4

03 February 2009 17:22  [Source: ICIS news]

TORONTO (ICIS news)--HSBC has cut its target price and rating for the shares of Dow Chemical after “very disappointing” fourth-quarter results and the likelihood of a dividend cut, it said on Tuesday.

The London-based international bank cut its price target for Dow Chemical’s share to $11, from $30, and downgraded its rating for the stock to “neutral” from “overweight”.

The bank’s move reflected the significant weakness in global markets and its concerns for the shares as Dow struggled through the pending Rohm and Haas merger and litigation, as well as concerns over the safety of Dow’s dividend, it said.

Dow’s shares were up 5.8% to $11.69 (€9.12) in Tuesday morning trading in New York, even though it reported a net loss of $1.55bn for the fourth quarter of 2008 as demand dropped away sharply and the company took restructuring and other charges.

On a per share basis, Dow’s fourth-quarter loss was 62 cents, compared with analysts’ expectations of a loss of 6 cents, HSBC said.

“Despite the strength in earnings for the first three quarters of 2008, the company only generated earnings of $1.82 per share for the full year, and we also struggle to see how the company will earn its dividend of $ 1.68 per share in 2009,” the bank said.

“In the current credit-constrained market, coupled with a large increment in debt load from the Rohm and Haas acquisition looming, we believe that a dividend cut is imminent,” it said.

($1 = €0.78)

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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