JP Morgan raised its investment recommendation on Lyondell Chemical (LYO) to neutral from underweight.
Analyst Jeffrey Zekauskas said Lyondell Chemical has improved near term earnings per share prospects. He raised his $2.25 2005 earnings per share estimate to $3.30 due to sharply higher Methyl Tertiary Butyl Ether (MTBE), refining margins, and likely better fourth quarter petrochemical performance; he upped his $3.00 2006 estimate to $3.35 on the belief that the first half of 2006 will see a continuation of strong MTBE and refinery trends. The analyst noted profits in the MTBE stratospheric due to closures of capacity that tightened up the supply/demand balance, and high gasoline prices that lifted the value of MTBE as a blending component. The analyst sees monthly hikes in ethylene and polyethylene selling prices from September to October.