Market Overview

Citi's Chemicals And Agriculture Pair Trade: Buy Mosaic, Hold Sherwin-Williams

Share:
Citi's Chemicals And Agriculture Pair Trade: Buy Mosaic, Hold Sherwin-Williams
Related SHW
8 Biggest Price Target Changes For Monday
Benzinga's Top Upgrades, Downgrades For December 17, 2018
Coating stocks on the rise as Axalta guidance in-line with consensus (Seeking Alpha)
Related MOS
52 Biggest Movers From Yesterday
41 Stocks Moving In Wednesday's Mid-Day Session

In a preview of third-quarter earnings in the chemical and agriculture sector, Citigroup highlighted a pair trade in the sector. 

The sell-side firm recommended buying Mosaic Co (NYSE: MOS) but moving to the sidelines on Sherwin-Williams Co (NYSE: SHW).

The Analyst

Analyst P.J. Juvekar upgraded Mosaic from Neutral to Buy with a price target lifted from $36 to $40. Sherwin-Williams was downgraded from Buy to Neutral with a price target cut from $492 to $435. 

Citi also removed Buy-rated DowDuPont Inc (NYSE: DWDP) from its Focus List.

The Thesis

Ongoing raw material headwinds and slower growth in key markets such as China has tempered expectations in the chemicals sector, Juvekar said in a Wednesday note. (See the analyst's track record here.) 

The analyst reduced estimates as well as target multiples by up to 1 times EV/EBITDA.

Higher oil and ethane prices and slower demand would make it tough to take advantage of price increases, Juvekar said. 

Among the paint makers, Sherwin-Williams is unlikely to dodge raw material and end market woes outlined by peers PPG Industries, Inc. (NYSE: PPG) and HB Fuller Co (NYSE: FUL), the analyst said. 

PPG recently warned of higher material costs and weak Chinese demand in addition to higher logistics expenses arising from higher crude oil prices and a stronger dollar.

Citi reduced its third-quarter as well as fiscal 2019 EPS estimates for Sherwin-Williams to $5.72 and $22, respectively, and slashed the price target by $57. 

On the other hand, Citi sees Mosaic as benefiting from improving phosphate fundamentals.

The Price Action

Sherwin-Williams shares have added about 1.8 percent year-to-date, while Mosaic has gained about 17 percent.

Related Links:

With Sale of Agricultural Business Pending, Citi Takes Neutral Stance On Platform Specialty Products

5 Agriculture Stocks That Could Withstand A Trade War With China

Latest Ratings for SHW

DateFirmActionFromTo
Dec 2018JP MorganUpgradesNeutralOverweight
Oct 2018BuckinghamMaintainsNeutralNeutral
Oct 2018Credit SuisseMaintainsOutperformOutperform

View More Analyst Ratings for SHW
View the Latest Analyst Ratings

Posted-In: Citigroup P.J. JuvekarAnalyst Color Upgrades Downgrades Price Target Analyst Ratings Best of Benzinga

 

Related Articles (FUL + DWDP)

View Comments and Join the Discussion!

Latest Ratings

StockFirmActionPT
ADIMorgan StanleyDowngrades0.0
ALKSGoldman SachsDowngrades26.0
BHGECredit SuisseUpgrades25.0
BLMNMorgan StanleyUpgrades0.0
OKTADA DavidsonInitiates Coverage On62.0
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.

Square CFO Sarah Friar Departs: Analysts Debate What To Do Next With The Stock

Some Traders Were Prepared For Wednesday's Tech Slide