Ahead Of The Bell: Ashland

HARTFORD, Conn. (AP) — Chemical maker Ashland Inc. reported positive sales trends in August and is poised to benefit from an economic recovery, an analyst said Wednesday.

Analyst Laurence Alexander of Jefferies and Co. said in a client note the Covington, Ky., company faces near-term margin pressure from weak markets. In addition, customers are reducing their inventories, putting additional pressure on Ashland's earnings, he said.

However, he reiterated a "Buy" rating based on Ashland's "significant operating leverage to a recovery and robust free cash flow," he said.

Alexander raised his 2009 earnings estimate to $3.05 per share from $2.95 per share. And he raised his price target to $54 from $42.

Analysts surveyed by Thomson Reuters expect, on average, that Ashland will earn $3.04 per share this year.

Ashland reported "decent August trends" in a regulatory filing Tuesday, with sales in Europe stronger than usual, particularly in its water and performance materials businesses, Alexander said.

The two businesses rose by about 5 percent to 10 percent from their low points, he said.

The fourth quarter should continue to benefit from cost-cutting and improved volumes, Alexander said.