(ICIS) -- Wall Street analysts on Wednesday cut profit estimates for US chemical companies for the fourth quarter and the full-year 2012, amid slowing global economic growth, weaker demand and lower margins. The latest round of profit forecast reductions come from US-based investment banks Well Fargo and JP Morgan.
⌠We are of the belief that third quarter earnings will hold up relatively well across chemicals - up more than 20% year on year - but see some downside risk to fourth quarter estimates as near-term industry dynamics (lower oil, higher ethane) and cautious purchasing behaviour are impacting olefin margins, said Wells Fargo analyst Frank Mitsch in a research note.
The analyst lowered profit forecasts for Netherlands-based LyondellBasell and US-based companies Georgia Gulf and Westlake Chemical. For LyondellBasell, Mitsch took down his third quarter 2011 earnings per share estimate by 5 cents to $1.30, and his fourth quarter estimate by 20 cents to 83 cents, leading to full year 2011 earnings per share of $4.85. He also cut his 2012 forecast by 25 cents to $4.85.
The analyst reduced his fourth quarter earnings per share estimate on Georgia Gulf by 10 cents to 36 cents on weaker expected aromatics results. Mitsch expects the company to earn $2.10/share in 2011 and $2.25/share in 2012.
For Westlake, the analyst cut his fourth quarter estimate by 10 cents to 84 cents/share, leading to overall 2011 earnings per share of $4.40. For 2012, he also cut his forecast by 35 cents to $4.40.
The analyst said temporary market dislocations have compressed olefin margins, which could face pressure through the end of the year.
MRC