Wall Street too cynical in H2 chem profit forecast - analyst

12 August 2010 21:47  [Source: ICIS news]

By Joseph Chang

NEW YORK (ICIS)--Wall Street profit estimates for US chemical company earnings in the second half of the year are too cynical and will likely have to rise, an analyst said on Thursday.

“While volume trends in the second half will not be as strong as in the first, we think year-over-year earnings comparisons will fare well,” said Hassan Ahmed, partner and head of research at US-based Alembic Global Advisors.

“The consensus forecast of drops of around 30% in second-half earnings from the first half is overly cynical,” he said. “Estimates will likely have to rise.”

Lower expected US ethane feedstock costs will give petrochemical and polymer producers the opportunity to expand margins, even as volumes fall off from the first half, said the analyst.

Analysts already had a pessimistic view of second-half chemical sector earnings because of expected large amounts of olefins capacity coming on in the Middle East and Asia, noted the analyst.

“But Q2 saw companies posting very strong numbers, and most management teams said they were not seeing much of a slowdown,” said Hassan.

“While there has been a steep correction in pricing in some areas, the prospects for healthy demand and margin expansion are good,” he added.

The analyst said he expects to see continuing strength in electronic materials, coatings and engineering plastics.

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By: Joseph Chang
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