04 February 2011 21:47 [Source: ICIS news]
By Joseph Chang
“Following Dow’s strong Q4 results with earnings per share 38% ahead of consensus, we are raising our 2011-2012 forecasts by 5-10%,” said Morgan Stanley analyst Paul Mann.
The analyst boosted his 2011 earnings-per-share estimate by $0.15 to $3.00 (€2.19), which is 22% ahead of consensus estimates of $2.46. He also raised his 2012 forecast by $0.36, to $3.90 – also 21% ahead of a consensus of $3.22.
“Consensus forecasts are wrong. [They] fail to capture the earnings power Dow has during the next 1-3 years,” said Mann, who is calling for a petrochemical earnings “supercycle” in the
However, in the near term, lower European margins and higher raw material costs could weigh on the shares, he said.
“Propylene, a major input cost for Dow, is up 35% in the
Susquehanna International Group analyst Don Carson raised his 2011 earnings-per-share forecast by $0.50 to $3.00, and his 2012 estimate by $0.75, to $3.50.
“We expect the 2010 strength in Basic Plastics to continue in 2011. The recent run-up in oil prices has widened the cost advantage that US ethane-based ethylene producers have versus largely naphtha-based Asian and European ethylene producers,” said
“As a result, the opportunity to export ethylene derivatives to Asia from the US Gulf has reopened, even with increased supplies of low-cost
BB&T Capital Markets analyst Frank Mitch raised his 2011 earnings-per-share estimate by $0.35 to $2.60, and introduced a 2012 forecast of $3.20.
However, JP Morgan analyst Jeffrey Zekauskas kept his 2011 earnings-per-share estimate at $2.30 and his 2012 forecast at $3.10.
“We do not share the views of the super-cyclists. We think, instead, that the trajectory of the petrochemical cycle over the coming four years is a long profitable plateau bending upward or downward with the price of oil,” said Zekauskas.
“Ethane crackers are profitable because of the large gap between ethane and naphtha cracking margins. Naphtha crackers are profitable because of high co-product values. The typical profit degradation that comes with low global capacity utilisation rates has not occurred this cycle,” he added.
The analyst also noted that prior forecasts of large amounts of petrochemical capacity shutting down are now less certain, lowering projected utilisation rates.
($1 = €0.73)
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