Wells Fargo Starts Dow Chemical (DOW) at Market Perform, Strong Potential Drivers
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Price: $31.07 +2.34%
Rating Summary:
15 Buy, 14 Hold, 2 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
Rating Summary:
15 Buy, 14 Hold, 2 Sell
Rating Trend:
Down
Today's Overall Ratings:
Up: 13 | Down: 14 | New: 11
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Wells Fargo initiates coverage on shares of Dow Chemical (NYSE: DOW) with a Market Perform rating and $28-$30 valuation range.
The company is trying to transform itself into a more specialty oriented brand with the acquisition of Rohm and Hass. The firm notes that while margins have improved, it is most likely due to cost cutting instead of sources of EBITDA contribution. Wells believes that commodities will continue to account for a majority of their portfolio.
DOW has $0.50 per share in earnings growth by 2016 as it takes advantage of the abundent amount of natural gas in America. The company will be able to use its natural gas segment as a steady source of revenue for some time.
Management has set its near term earnings goal at $4 per share, but the firm notes that there may be some upside to that with their potential growth drivers.
For 2011 and 2012, Wells Fargo estimates EPS of $2.80 and $3.20 with $60.69 billion and $63.3 billion in revenue for the two years.
An analyst at Wells comments, "While we recognize Dow's efforts in becoming more specialty oriented, we would be remiss in not recognizing that commodities are still a large driver of results. As such, current valuation appears fair with the uncertain economic backdrop. We note that leverage is above the peer group at 2.0x net debt-to-EBITDA, but the dividend yield of 3.9% is certainly appealing."
For more ratings news on Dow Chemical click here and for the rating history of Dow Chemical click here.
Shares of Dow Chemical closed at $25.76 yesterday.
The company is trying to transform itself into a more specialty oriented brand with the acquisition of Rohm and Hass. The firm notes that while margins have improved, it is most likely due to cost cutting instead of sources of EBITDA contribution. Wells believes that commodities will continue to account for a majority of their portfolio.
DOW has $0.50 per share in earnings growth by 2016 as it takes advantage of the abundent amount of natural gas in America. The company will be able to use its natural gas segment as a steady source of revenue for some time.
Management has set its near term earnings goal at $4 per share, but the firm notes that there may be some upside to that with their potential growth drivers.
For 2011 and 2012, Wells Fargo estimates EPS of $2.80 and $3.20 with $60.69 billion and $63.3 billion in revenue for the two years.
An analyst at Wells comments, "While we recognize Dow's efforts in becoming more specialty oriented, we would be remiss in not recognizing that commodities are still a large driver of results. As such, current valuation appears fair with the uncertain economic backdrop. We note that leverage is above the peer group at 2.0x net debt-to-EBITDA, but the dividend yield of 3.9% is certainly appealing."
For more ratings news on Dow Chemical click here and for the rating history of Dow Chemical click here.
Shares of Dow Chemical closed at $25.76 yesterday.
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