Analyst Lowers Estimates for Dow Chemical

Midland, MI, Jan. 2, 2009--An analyst cut his earnings estimate for Dow Chemical Co. Friday well below Wall Street's expectations, citing worry the nation's largest chemical maker will face trouble this year in its basic plastics business.

JPMorgan analyst Jeffrey J. Zekauskas now expects Dow to earn $1.50 per share in 2009, compared with a previous estimate for earnings of $2 per share.

"Global economic weakness tends to lower demand, operating rates and margins for commodity plastics," Zekauskas said in a note to clients. "We project that Dow's basics plastics segment is likely to face pressures in 2009 related to lower product pricing and lower estimated cash margins."

The basic plastics business makes everyday products like shopping bags and cups.

Zekauskas kept a "Neutral" rating on Dow, but lowered his price target to $15 from $20, suggesting he doesn't expect the stock to change much from Wednesday's $15.09 close.

The reduced estimates come after a Kuwait state-owned company pulled out of a $17.4 billion joint venture with Dow on Sunday. Dow had hoped the venture would shield it from rapid changes in commodity prices and add more than $7 billion in cash to its balance sheet.

That deal's demise put into question Dow's $15.3 billion buyout of Philadelphia-based Rohm & Haas Co. If Dow does not close on the deal by Jan. 10, the $78-per-share purchase price increases daily.