BASF earnings may see upside as sentiment indicator jumps - Bernstein

23 December 2011 18:06  [Source: ICIS news]

LONDON (ICIS)--BASF's 2012 earnings could be better than previously expected as a recent survey showed a sharp improvement in Germany's chemical industry expectations, analysts at Bernstein Research said on Friday.

Bernstein said December’s German chemical industry expectations survey, by Munich-based Ifo institute, “improved significantly” – to minus 0.6 from minus 11.9 in November.

“[This] could signal upside to our estimates,” the analysts said in a research note to clients.

In early November, Bernstein cut its estimate for BASF's 2012 earnings per share to €5.04, warning that the company’s earnings were likely to fall from 2011 estimates of €6.17 because of deteriorating confidence in the chemicals industry and lower volume growth expectations.

However, following the release of the December survey on Friday, the analysts said BASF’s 2012 adjusted earnings per share could hit €5.90, “if [the Ifo indicator] continues on its current trend.”  

Bernstein's analysts relate data from the expectations survey to BASF’s share price performance and net margins, and to overall European chemicals volume growth.

The analysts added that other indicators from the latest survey “appear to be negative, but are stable.”

The survey showed that chemical inventories continue to be “too high”, but inventories were only up slightly, compared with the November survey, and were nowhere near the 2008/2009 crisis highs, they said.

Bernstein rates BASF's shares with a €53 price target. The shares were priced at €52.53/share on Germany's Xetra stock exchange at 17:35 local Frankfurt time.

“In the near term, we remain cautious [BASF's] earnings will likely decline in the coming quarters,” the analysts said.

“However, the improvement in the latest Ifo indicator could signal significant improvement in the second half of 2012,” they said.

In related news, Ifo said earlier this week that Germany’s overall business confidence improved in December, after stabilising in November.

For more on BASF and other producers visit ICIS company intelligence
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By: Stefan Baumgarten
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