Shares Of Solutia Rise On Analyst's Note

ST. LOUIS (AP) — Shares of Solutia Inc. rose Friday after an analyst whose company managed the underwriting of its 20.5 million-share offering raised his adjusted earnings forecast.

The specialty chemicals manufacturer's stock rose 16 percent in early trading, a day after the price fell 8.3 percent due to the offering which diluted the value for current shareholders.

The share offering cut Solutia's net debt to $1.12 billion from $1.3 billion, Jefferies & Co. analyst Laurence Alexander said. Solutia also reported sales rose $1 million to $131 million in May.

Alexander said there is potential for the St. Louis-based company to grow with the recovery of both the auto and residential construction markets.

"Solutia should benefit from both a cyclical recovery and further deleveraging," Alexander said in a research note.

Alexander revised his forecast for adjusted second-quarter EBITDA, or earnings before interest, taxes, depreciation and amortization, to $85 million from $80 million. For the full year, he raised the estimate to $336 million, up $11 million.

The analyst also raised his per-share price target to $9 from $8 a share.

Solutia said it completed the offering of 20.6 million shares of common stock Thursday at $5 a share, raising gross proceeds of $103 million. It plans to use the money to repay a $74 million loan and finance corporate activities.

Jefferies & Co. handled the underwriting.

Shares of Solutia rose 85 cents, or 16 percent, to $5.95 in early trading.