KeyBank Downgrades Newmarket To Hold

In a report published by KeyBanc, NewMarket Corporation (NASDAQ: NVAX) saw a strong run and Lubrizol takeout multiple limits upside. Rating is revised to Hold.

KeyBanc said that, given the strength in shares of NewMarket Corporation yesterday following the announced acquisition of The Lubrizol Corporation (LZ-NYSE) by Berkshire Hathaway, we are downgrading our rating on NEU from BUY to HOLD. “The stock was up 11.8% yesterday vs. the SPX down 0.6% given the implied valuation premium applied from the LZ transaction. At current levels, we see limited upside to our previous $155.00 price target or just 6% based on a FY11E P/E multiple of 11.5x. The stock is currently trading at an estimated FY11E EV/EBITDA multiple of 6.3x and a FY11E P/E multiple of roughly 10.8x and we believe the risk/reward profile at current levels warrants our HOLD rating at this time given persistent headwinds on the raw materials front, some concern on the strength of recovery, and relative outperformance year-to-date with NEU stock up 18.3% vs. the SPX up 3.1% and our specialty chemical coverage universe up 0.6%, on average. That being said, we continue to have confidence that mid teens operating margins are sustainable in a third consecutive year, the lubricant additives industry will remain rational on all fronts despite rising raw material costs and that NEU can generate after tax ROIC in the low 20% level, solid free cash flow and steady EPS growth.”

NewMarket Corporation closed yesterday at $146.00.