Dow Chemical may benefit if prices rise -Barron's
Sun Jun 26, 2005 02:04 PM ET
NEW YORK, June 26 (Reuters) - The recent slump in Dow Chemical Co.'s shares could prove an excellent buying opportunity if commodity-chemical prices rise in the second half of the year, Barron's newspaper said.
It said customers stockpiled commodity chemicals as prices rose last year and in early 2005, but many are now working through their inventories, setting the stage for rebounding prices.
Dow Chemical's stock closed on Friday on the New York Stock Exchange at $43.67, which is 23 percent below its 52-week high of $56.75 set on March 9. Barron's said the stock price of the largest U.S. chemical company might rise 37 percent in the next year to $60.
Barron's said commoditized materials accounted for about 51 percent of Dow Chemical's first-quarter profit. It said the rest came from less cyclical products, noting that part of Dow Chemical's business is "booming" as profit margins swell.
Barron's said Dow Chemical has an appealing 3 percent dividend yield, and recently traded at 7.9 times estimated 2006 earnings.
It said the latter compared with 14.8 times for DuPont , 9.2 times for Eastman Chemical Co. , and 10.5 times for diversified chemical companies. Eastman Chemical traditionally trades at a discount to Dow Chemical, Barron's said.
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