Market Overview

Morgan Stanley: Underperformance In DowDuPont Provides An Attractive Entry Point

Share:
Morgan Stanley: Underperformance In DowDuPont Provides An Attractive Entry Point
Related
Citi's Chemicals And Agriculture Pair Trade: Buy Mosaic, Hold Sherwin-Williams
Best Sector ETFs For October: 3 Stocks Really Matter
DowDuPont - When One Plus One Equals Three (Seeking Alpha)

DowDuPont Inc (NYSE: DWDP), a chemical conglomerate formed following the merger of Dow Chemical and Dupont, is soon to be split into three publicly-traded companies, focusing on agriculture, materials science and specialty products.

The Analyst

Morgan Stanley analyst Vincent Andrews remains Overweight on DowDuPont, with an $80 base-case price target, suggesting 20 percent upside from current levels.

The Thesis

Recent underperformance in DowDuPont has left shares trading at a 10 percent discount to peers, and the gap is likely to close in between now and the spin-offs, due to materialize in the first-half of 2019, Andrews said in a note. The underperformance, he said, is due to investor perception that there are no catalysts in 2018.

Although the market articulated limited need to own shares in the first half of 2018, the analyst expects sentiment to turn in the second half of the year, once Form 10s are filed, finalized credit ratings clarify ample BS capacity, and the market begins to value DowDuPont as three separate companies.

Andrews sees further upside from balance sheet use, as the company has a net leverage of 1.1 times the estimated EBITDA for 2018, which he feels can be increased to at least 2.5 times, as all the three companies have investment grade ratings.

The company could also benefit from strategic activity, especially at Specialty Co., the analyst said.

Price Action

DowDuPont shares are up merely 3 percent over the past year. The stock ticked up about 2.5 percent Wednesday to $68.04.

Related Links:

Watch These ETFs As Trade War Risks Rise

Credit Suisse Betting On Freshly Merged DowDuPont To Outperform

Latest Ratings for DWDP

DateFirmActionFromTo
Oct 2018CitigroupMaintainsBuyBuy
Oct 2018Exane BNP ParibasInitiates Coverage OnNeutral
Sep 2018NomuraDowngradesBuyNeutral

View More Analyst Ratings for DWDP
View the Latest Analyst Ratings

Posted-In: Morgan Stanley Vincent AndrewsAnalyst Color Reiteration Analyst Ratings Best of Benzinga

 

Related Articles (DWDP)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
NKEOppenheimerUpgrades0.0
SBEvercore ISI GroupUpgrades4.5
PTIRBC CapitalUpgrades0.0
GPSJP MorganDowngrades24.0
GIIIB. Riley FBRUpgrades47.0
View the Latest Analytics Ratings
Don't Miss Out!
Join Our Newsletter
Subscribe to:
Market in 5 Minutes
Everything you need to know about the market - quick & easy.
Daily Analyst Rating
A summary of each day’s top rating changes from sell-side analysts on the street.
Fintech Focus
Your weekly roundup of hot topics in the exciting world of fintech.
Thank You
for registering for Benzinga’s newsletters and alerts.
• The Daily Analysts Ratings email will be received daily between 7am and 10am.
• The Market in 5 Minutes email will be received daily between 7am and 8am.
• The Fintech Focus email will be received every Friday between 2pm and 5pm.

Marc Chaikin: It's A Stock Picker's Market

Nordstrom Terminates Go-Private Talks; Now What?