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The Dow Chemical Company Message Board

  • zackfoot zackfoot Jan 27, 2006 9:44 AM Flag

    UBS brings down #s on DOW

    * 4Q In Line:
    Dow reported $1.02 to finish the year, roughly in line with the Street.
    Sales are up 9%, and the specialty performance businesses are now more than
    half the earnings of Dow. Most impressive is the nearly 40% profit gain in
    Performance Plastics, despite raw material pressure. Dow outperformed more
    commodity peers this quarter as well.

    * Outperforming Industry:
    Strong pricing is passing through raw material costs much better than
    competitors we track. Hurricane impacts were much less at Dow as well, and
    costs are under excellent control. Dow should provide leadership going
    forward.

    * Trim 2006, But On Way to 2-Year Peak - $6.50 in 2007E:
    We trim this year by 35 cents due to higher input costs, but all trends
    indicate that our above consensus $5.65 is achievable this year. Debt pay
    down has been aggressive to help as well. We should see leverage in the
    ethylene chain, still high free cash from the chlorine chain, and
    specialties should maintain high margins. we introduce a $6.50 for 2007, the
    end of a two-year presumed peak.

    * Valuation: Maintain $60 Target:
    We are maintaning our price target at $60, as Dow usually achieves 10x peak
    EPS. This is also a slight premium to the smaller cap and more leveraged
    peer group, we feel warranted given Dow's superior balance sheet, growth,
    returns and liquidity.

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