Dow Chemical shares jump after Goldman Sachs analyst upgrades company's stock on its integration of Rohm and Haas

Liling Tan

NEW YORK , July 20, 2009 (Associated Press) – Shares of Dow Chemical Co. jumped Monday after an analyst touted the company's ongoing integration of Rohm & Haas and recommended investors buy its shares.

The stock rose 65 cents, or 3.8 percent, to $17.64 in morning trading. Shares have traded between $5.89 and $39.99 in the past 52 weeks.

Midland, Mich.-based Dow bought Rohm last April for more than $16 billion, a deal that added massive amounts of debt to its balance sheet and caused concern on Wall Street about the company's ability to financially survive and prosper, especially amid the recession.

Dow's CEO, Andrew Liveris, immediately undertook an aggressive cost-cutting program, including massive layoffs, as well as the sale of several business units, including the iconic Morton Salt division.

Those moves helped lower the company's debt substantially, and helped alleviate some financial stress just as Dow was folding in Rohm's many business divisions.

The Rohm deal helped Dow move away from commodity chemicals - whose prices are generally tied to the volatile crude oil and natural gas markets - and into more specialty chemicals, such as perfumes and paints, that tend to be made in smaller batches and sold at higher profits.

It's that specialty chemicals business - which comprises about two-thirds of the company's revenue - that will likely help Dow's earnings rebound in 2010, said Goldman Sachs analyst Robert Koort.

"Dow has a strong track record of successful merger integration and its cost-cutting prowess is considered an integral part of (its) culture," he said in a note to clients.

Koort rates Dow as "Conviction Buy" with a $23 price target, implying he expects shares to jump

Dow has a standing policy of not commenting on analyst notes.

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