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Strategies & Market Trends : Technical analysis for shorts & longs -- Ignore unavailable to you. Want to Upgrade?

To: Johnny Canuck who wrote (38154)	10/3/2002 1:06:49 AM
From: Johnny Canuck	Respond to of 69103

Reuters Business Report Dow Chemical Warns of Profit Shortfall Wednesday October 2, 4:35 pm ET By Bernard Orr NEW YORK (Reuters) - Dow Chemical Co. (NYSE:DOW - News), the No. 2 U.S. chemical company, on Wednesday warned it will miss third-quarter earnings estimates, surprising analysts and sending the company's shares lower. ADVERTISEMENT Dow cited higher costs for oil and gas feedstocks, mainly in Europe, as the principal reason for the warning, which had a ripple effect in chemical industry stocks. "Shockingly poor results," said Bear Stearns analyst Frank Mitsch. "It's a surprise as Dow is noted as one of the better hedges of feedstocks. Clearly the third-quarter results belie that assertion." The company's shares closed down about 8.6 percent, at $27.25 on the New York Stock Exchange. Dow Chemical joins a number of domestic raw material producers that have ratcheted down earnings forecasts, aggravating fears that a recovery for the struggling U.S. economy may still be a long way off. Dow's news sent shares of DuPont Co. (NYSE:DD - News) down 5.9 percent, while Eastman Chemical Co. (NYSE:EMN - News) dropped 8.2 percent and Lyondell Chemical Co. (NYSE:LYO - News) fell 11 percent. Air Products and Chemicals Inc. (NYSE:APD - News) slipped 6 percent. Midland, Michigan-based Dow expects third-quarter earnings per share to be "about the same" as the 16-cent a share profit it reported in the year-earlier quarter, a forecast that is nearly 45 percent below the 29 cent consensus estimate of analysts polled by research firm Thomson First Call. "Dow's announcement is a surprise for us," Lehman Brothers analyst Sergey Vasnetsov said. "My number for Dow was 24 cents while the consensus was 29 cents." Vasnetsov, who said he didn't anticipate the magnitude of the warning in which Dow Chemical cited higher costs for raw materials, felt there may be other factors involved. "My view is that there is a big slow down in sales volume in performance chemicals and plastics which predominately serve industrial applications," he said. Despite some signs the U.S. economy is recovering, recent announcements from makers of chemicals, wood products, and metals show they continue to suffer from a two-year downturn in demand and depressed raw materials prices. The chemical industry is also suffering from soft demand in the overall manufacturing industry. In addition, prices for key feedstocks such as crude oil are rising. Analyst Graham Copely of Sanford Bernstein said the company has been fighting rising energy prices that makes for a difficult back drop of maintaining costs. "This is not a Dow specific problem ... it's an industry problem," said Copely. "Dow just pre-announced first. Dow has been cutting prices drastically. But you are getting an indication of how competitive this industry is and how lackluster the economy is." "My fear is that we see a very, very dramatic change in fourth-quarter expectations from here on," Copely noted. Copely said his fourth-quarter earnings estimate for Dow Chemical is 27 cents a share, compared with a general consensus of 34 cents. "Both of those numbers are probably too high," he said. Dow Chemical's warning comes as a turnaround from the stance it held in July when it reported lower second-quarter earnings from the previous year but forecast substantially better earnings for the third-quarter. Chief Financial Officer J. Pedro Reinhard had said he expected "overall economic activity to continue its improvement in the third quarter." As a result, the company said third-quarter earnings should be "substantially better" than the severely depressed results during the year-earlier period and may be better than those for the just completed quarter. In the second quarter, the company reported earnings of $238 million, or 26 cents a share, a 15 percent decline from the year-ago period. In the first quarter of the fiscal year Dow Chemical reported a profit, compared with a year-earlier loss. Earlier, Standard & Poor's Ratings Services said that Dow's announcement that it would miss analyst expectations does not affect its ratings or outlook on the company. [Harry: How long can they keep oil and gas prices high relative to the weak end user demand.]