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KeyBanc Initiates Coverage on Solutia (SOA) with a Hold; Turnaround Tires Have Heated Up, but a Catalyst Needed

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November 13, 2009 7:21 AM EST

KeyBanc initiates coverage on Solutia Inc. (NYSE: SOA) with a Hold.

KeyBanc analyst says, "Solutia has undergone a significant transformation over the past few years. With much of the heavy lifting complete and considering solid fundamentals, an improving margin profile and good leverage to an economic recovery, we suspect the Company is now much better positioned to set forth on a growth path. However, with the stock on a significant run year-to-date and considering a fairly leveraged balance sheet, reasonable valuation levels and the absence of a near-term catalyst, we feel that much of the upside potential is already discounted into the current stock price. We would also like to gain more comfort that SOA's improved margin profile is sustainable in order to become more positive...We see 2009E EPS of $0.82 improving to $0.95 in 2010E, with growth driven by a rebound in volumes, improved utilization, cost savings and lower interest expense, partially offset by a higher share count...With the stock above the mid-point of our projected trading range, we feel the current risk/reward profile is fairly evenly balanced."

To see more analyst ratings on SOA Click Here.

Solutia Inc. manufactures and markets various chemical and engineered materials used in the consumer and industrial applications worldwide.