Goldman Sachs cut Westlake Chemical (WLK
) and NOVA Chemicals (NCX
) to underperform from in-line.
Analyst Edlain Rodriguez has become more bearish on share price prospects due to valuation. He sees nearly 20% to 25% downside as these stocks are trading above their peak values: NOVA Chemicals is at 8.8 times estimated 2006 peak earnings per share (EPS,) and Westlake Chemical is at 9.4 times. He believes investors may be reluctant to pay up for one to two quarters of unsustainable EPS before ethylene margins begin a long, painful retreat in the second half.