Huntsman, Sherwin-Williams, Nova Chemicals, PPG downgraded at UBS

Mon. September 08, 2008; Posted: 10:07 AM

BOSTON, Sep 08, 2008 (Thomson Financial via COMTEX) -- SHW | Quote | Chart | News | PowerRating -- UBS on Monday resumed its coverage for the U.S. commodity chemical sector and downgraded shares of Huntsman Corp., Sherwin-Williams Co., Nova Chemicals Corp., and PPG Industries Inc. to neutral from buy, citing a softer outlook for the industry in 2009 and a lack of near-term catalysts.

Analyst Gregg Goodnight said he is anticipating a nearly 9% reduction in earnings for commodity chemical stocks in 2008 from 2007 actual, and a further decrease of about 1% to 2% in 2009. Previously, he had expected a 7% improvement in average earnings-per-share in 2009 compared to 2008.

Goodnight trimmed his forecast of average sector earnings in 2009 to $3.56 from $3.80 a share on a weighted average basis.

"A key driver for softer earnings in 2008 has been the nearly 50% increase in crude oil pricing from the beginning of the year through the end of June," Goodnight said in a note to clients. "Commodity chemical producers were not able to keep up with increased costs despite significant product price increase announcements."

Goodnight said he sees a "steady stream" of negative macro-economic news and few near-term catalysts for the sector in the next 12 to 18 months.

He added that there will be "some recovery" of these margins and working capital in the third quarter, but a "poorer" economic outlook will dampen the fourth quarter.

Goodnight cut his price target to $13.50 from $15 for Huntsman, to $63 from $70 for Sherwin-Williams, to $29 from $38 for Nova Chemicals, and to $72 from $85 for PPG Industries.

In morning trading Monday, shares of Sherwin-Williams were up $1.81 to $62.02, Nova Chemicals rose 48 cents $26.30 and PPG rose 58 cents to $65.67. Shares of Huntsman, however, fell 90 cents to $12.12. Casey Logan cl/vj

Copyright Thomson Financial News Limited 2007. All rights reserved. The copying, republication or redistribution of Thomson Financial News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Financial News.

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For full details on Nova Chemicals (NCX) click here. Nova Chemicals (NCX) has Short Term PowerRatings of 2. Details on Nova Chemicals (NCX) Short Term PowerRatings is available at This Link.

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