UPDATE: Nomura Initiates Coverage On Dow Chemical

Nomura on Tuesday initiated coverage on Dow Chemical Co (NYSE: DOW) with a Buy rating and $57 price target.

Analyst Aleksey Yefremov cited four reasons to own Dow:

1. “Earnings growth should accelerate above "normal" levels as Dow begins to harvest major capital investments in 2H15.”

2. “DOW's portfolio is improving as it sheds ~$8bn-plus in commodity and non-core assets.”

3. "Capex to decline after a 2015 peak, aiding ongoing share buybacks under a $6.1bn authorization (~11 percent of market cap).”

4. “In addition to projects, we see 3–6 percent growth in Dow's "base" business of making chemicals for end markets, ranging from industrial and construction to ag and electronics.”

Yefremov based the target price “on a blend of 2016 EBITDA and discounted "normalized" (circa 2018) EBITDA and represents 14.8x 2016 EPS of $3.83.”

The report set FY14E EPS at $2.97 and FY15E EPS at $2.81.

Dow Chemical recently traded at $43.35, down 0.23 percent.