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JULY 28, 2003
Why Dow Chemical Should Be a Buy Long-awaited relief may be around the corner for Dow Chemical (DOW ). Although its stock has leaped from 25 in mid-March to 30 on July 16, the Street is far from convinced that the largest U.S. chemical company is out of the woods: Of the 14 major analysts who track Dow, only four rate it a buy. Asbestos liabilities and surging oil and gas prices that fuel higher feedstock costs have become a double whammy. But some pros think it's time to buy: "We expect Dow Chemical will get double relief soon from these issues," says Earl Gaskins, managing director at Brandywine Asset Management, which owns nearly 300,000 shares. He puts Dow's worth at 42, plus a 4% dividend yield. He's optimistic about Dow's asbestos problem, since the Senate is moving forward with a $108 billion fund for victims.  Dow's woes stem from Union Carbide, bought in 2001, which once made products containing asbestos. Gaskins argues energy prices will drop later in the year as demand projections don't support current prices. Indeed, natural gas prices, which had soared, are easing. He also sees more supply from Russia and elsewhere. Chemical prices, he adds, will rise as the economy picks up. Consensus estimates are 96 cents a share for 2003 and $2.08 for 2004. Gaskins sees Dow earning $5 in 2005. Prudential Securities' Andrew Rosenfeld says 2004 will be a transition year for chemicals as demand begins to catch up to oversupply. He rates Dow a buy.Unless otherwise noted, neither the sources cited in Inside Wall Street nor their firms hold positions in the stocks under discussion. Similarly, they have no investment banking or other financial relationships with them.  By Gene G. Marcial
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