Citi rates DOW as Buy, High Risk (1) - After a chat with management post the company's recent downgrade, the broker is fairly confident that the company's core business is tracking well. So while Citi admits it will take time for investor confidence to return following the downgrade, the broker believes the PPP rail execution risk is now more than priced in.
With the stock trading at 7x FY11 consensus earnings, Citi thinks the valuation looks attractive. The Buy call and $7.35 target price are maintained.
Target price is $7.35 Current Price is $4.68 Difference: $2.67 If DOW meets the Citi target it will return approximately 57% (excluding dividends, fees and charges).
The company's fiscal year ends in June. Citi forecasts a full year FY10 dividend of 29.50 cents and EPS of 59.90 cents . At the last closing share price the estimated dividend yield is 6.30%.
At the last closing share price the stock's estimated Price to Earnings Ratio (PER) is 7.81.
DOW Price at posting:
$4.61 Sentiment: None Disclosure: Held
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