Jefferies Cuts Price Targets on Ashland (ASH) as Margin Outlook Weakens

Jefferies is reiterating its Buy rating on shares of Ashland Inc. (NYSE: ASH), but is cutting its price target from $65 to $60.

The company released its quarterly earnings results above expectations, the firm notes segment results came in short of expectations. Sales for the quarter fell 23 percent year over year. ASH had $25 million in savings for the quarter due to $40 million restructuring program.

An analyst at Jefferies comments, "Disappointing results in Valvoline this quarter included a lot of noise: approximately 0.75m gal quarterly volume, or 5%, lost due to the loss of a low-margin tolling customer; price offset approximately $55m of a $65m increase in raw materials; inventory destocking in DIY; sluggish DIFM volumes; and SG&A inflation outpacing sales growth."

For Q1, Jefferies forecasts EPS of $1.14. The firm is cutting its FY12 EPS estimate from $5.40 to $5.00 on $8.11 billion in sales. The lower estimates reflect lower
margins in Valvoline and Performance Materials and a $0.30 YoY benefit from a pension accounting change.

For an analyst ratings summary and ratings history on Ashland Inc. click here. For more ratings news on Ashland Inc. click here.

Shares of Ashland Inc. closed at $50.04 yesterday.

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