) to overweight from neutral.
Analyst Jeffrey Zekauskas says Lubrizol's has free-cash-flow yield of 8.6%, vs. 6.1% for its peers for 2005. Lubrizol trades at 13.8 times p-e and 6.9 times EV/EBITDA, vs. 17.7 times and 8.3x, respectively, for average chemical company.
He believes volumes for Lubricant Additives and Specialty Chemicals will be soft but prices will continue to be resilient. Should raw material pricing pressure abate, Lubrizol will have the opportunity to expand gross margins materially.
Zekaukas expects earnings per share to be anchored by substantial cost reduction efforts related to integration of Noveon and cost savings could total 25 cents to 30 cents per share in 2005.