Chemicals Initiated at Evercore ISI; Time to ‘Stand And Deliver’
Chemical sector’s time has come to “stand and deliver” after sector outperformed, re-rated to all-time highs on expectations of sharp earnings recovery, Evercore ISI analyst Laurent Favre writes while initiating coverage of 21 European and 8 U.S. chemical makers.
- Whole sector can grow EPS by 12% through 2018, which should be enough to generate 7% total shareholder return on average
- Recommends buying coatings; sell gases, auto catalysts, Christian Hansen (CHR DC)
- Likes Arkema, LYB, BASF, Solvay among cyclicals
- Sell Covestro, Lanxess; sees DSM, UNVR as “hidden value” stocks
- Top picks: Arkema, Akzo, DSM, BASF in Europe; LYB, PPG, AXTA, UNVR in U.S.; bottom picks are PX, Air Liquide, Umicore, Covestro, Christian Hansen
- U.S. initiations: Buy on AXTA (PT $34), LYB ($109), PPG ($117), RPM ($59), UNVR ($35); hold on IFF ($125); sell on APD ($131), PX ($107)