Thursday, KeyBanc Capital upgraded OM Group Inc. (OMG) shares to Hold from Underweight. The brokerage raised its 2009 EPS estimate to $0.85 from $0.20, while initiating its 2010 estimate of $1.80.
In analyst Saul Ludwig opinion, valuing OMG shares on balance sheet metrics makes the stock appear attractive. At $24.38 the stock is trading below tangible book ($26 per share) coupled with $21 per share in working capital per share (including $8 per share in cash) and a minimal amount of debt ($26 million).
The analyst said that earnings are going to be down significantly in 2009 vs. 2008 and the prospects of a return to first half of 2008 cobalt price levels is unlikely as a significant amount of additional supply is set to start entering the market starting in second half of 2009.
The analyst added that although 2009 EPS can be viewed as a trough in earnings, a rapid increase in earnings in 2010 and 2011 would highly depend on the price of cobalt as well as recovery in demand for batteries and other electronic products.
The analyst's former first quarter of 2009 estimate was a loss of $0.23 per share (vs. a profit of $1.90 in first quarter of 2008), this included a $0.12 mark-to-market inventory adjustment, but since cobalt prices have rallied 30% in the last few weeks, he has eliminated that expense and his revised first quarter of 2009 estimate is a loss of $0.11.
Also, the analyst is now using $15/lb cobalt price (vs. $11/lb previously) for the balance of 2009. In the short term with cobalt moving higher and a belief that first quarter of 2009 earnings are going to be "less bad" than what previously estimated, the analyst upgraded the stock to Hold.
Currently, OMG is up $1.71 or 7.01% and trading at $26.09.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.