JP Morgan Lowers Estimates On Ashland

JP Morgan has published a research report on Ashland, Inc. ASH and is shaving forecast estimates due to Ashland's higher expenses. In the report, JP Morgan writes "We note a number of adjustments and uncertainties regarding ASH's accounts, including adjustments for Performance Materials JVs; higher corporate expense increases from stranded costs stemming from the Distribution divestiture; operating issues and start-ups at Aqualon; difficulties in raw materials pass-through in Water Treatment and Valvoline; and uncertainties from the use of cash proceeds from the Distribution sale. November monthly trends in aggregate were no different than our expectations; however, a likely $7 mn larger than expected corporate expense burden for F2011, in tandem with minor operational adjustments leads us to lower our F2011 earnings estimate for Ashland from $3.70 to $3.60; our F2012 projection remains $4.50. F2012 should benefit from the elimination of $0.30 per share in stranded costs, and a more normalized margin in Performance Materials. We note that our earnings estimates are substantially below both the F2011 Street estimate of $3.96 and F2012 Street projection of $4.87. Nevertheless, we believe that Ashland should outperform due to its attractive and inexpensive valuation, based on our forecasts, and high level of free cash flow, despite overaggressive Street expectations. Our 1Q:F11 EPS (ends December) forecast is now $0.64 vs $0.69 previously, and the Consensus of $0.66." JP Morgan maintains its Overweight rating and $65 price target. Ashland Inc. closed Friday at $51.84.