Wednesday, KeyBanc Capital upgraded NewMarket Corp. (NEU) shares to Buy from Hold with a price target of $110. The brokerage lowered its 2010 EPS estimate to $11.25 from $11.55 and its 2011 estimate to $11.60 from $11.90, while increasing its first quarter of 2010 estimate to $2.94 from $2.84.
Analyst Saul Ludwig views the 27% decline of NEU shares since January 1, the S&P 500 is down 3% over the same period, as an opportunity to initiate or add to an existing position. Based on 2010 estimates, the analyst upgraded the stock to Buy and established a price target of $110. NEU should be able to maintain operating margins in the mid to high teens going forward as improving volumes and price increases will offset higher raw material costs.
The analyst believes that the top four lubricant additive suppliers, who account for 95% of the global market, will remain rational with pricing. The analyst also noted that finished lube manufacturers have recently announced price increases which further solidify his belief that a rational pricing environment through the supply chain continues to exist.
The analyst believes the capacity that NEU and the industry will be adding over the next several years will be consistent with the global growth in demand. The analyst expects NEU's new distribution/mixing facility in Singapore will be fully operational by second half of 2010. This new facility should help better serve existing customers and grow in this important region.
The analyst noted that volumes have returned to a more normalized level and have favorable year-over-year comparisons in first half of 2010 vs. first half of 2009. The analyst is estimating volumes to be up 6% in 2010 vs. 2009. The analyst's volumes in first quarter of 2010 are up 24% year-over-year; he noted that volumes are flat sequentially (first quarter of 2010 compared to fourth quarter of 2009).
The analyst has lowered his earnings estimates as a result of increasing his operating expenses estimate and adjusting his FX assumptions due to the recent strength of the U.S. dollar vs. the Euro. Currently the analyst expects operating expenses (SG&A and R&D) to increase $16 million in 2010 vs. 2009. The analyst believes that the FX impacted 2009 EBIT by about $8 million and will be only a marginal benefit in 2010 based on the current exchange rates.
Currently, NEU is up $0.49 or 0.55% and trading at $88.78.
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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.