The market's choppy / consolidating pattern continues as 2008 begins, so defensive stocks remain prudent plays, and among these, Dow Chemical is worth a review.Dow Chemical (NYSE: DOW) is the No. 2 chemical company in the world and the largest in the United States. A leader in performance plastics, Dow's other products include polyethylene resins, fibers, films, and performance chemicals such as acrylic acid.
In general, analysts see a kaleidoscope of pricing conditions for Dow, but favorable industry revenue fundamentals on solid global economic growth: international sales account for more than 60% of revenue. Moreover, that patchwork of pricing conditions has prompted Wall Street to take a more-cautious stance with DOW, which has driven its P/E to about 12, but view that as getting DOW for a bargain price.
The risks? The standout risk with Dow concerns volatile costs for raw material. A substantial cost increase in this category could squeeze Dow's earnings results. The Reuters F2007/F2008 EPS consensus estimates for DOW are $3.71/$3.50.
The First Call mean rating for DOW is: Hold. [17 firms.] Mean 2008 target: $49.00 [high: $55, low: $43.]
Stock Analysis: Dow Chemical is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from DOW's shares. Sell / Stop Loss if you were to purchase shares in this company: $27.
DISCLOSURE: Joseph Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
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