The Zacks Analyst Blog Highlights: E.I. Du Pont de Nemours, The Dow Chemical, Eastman Chemical, Celanese and News Corp

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Jul 02, 2012, 09:30 ET

CHICAGO, July 2, 2012 /PRNewswire/ -- Zacks.com announces the list of stocks featured in the Analyst Blog. Every day the Zacks Equity Research analysts discuss the latest news and events impacting stocks and the financial markets. Stocks recently featured in the blog include E.I. Du Pont de Nemours & Co (NYSE:DD), The Dow Chemical Company (NYSE:DOW), Eastman Chemical Co. (NYSE:EMN), Celanese Corporation (NYSE:CE) and News Corp. (Nasdaq:NWSA).

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Here are highlights from Friday's Analyst Blog:

Chemistry Council Shows Choppy Recovery

The American Chemistry Council's ("ACC") recently released first monthly report on its new, first-of-its-kind economic indicator shows weak demand for chemicals, pointing to a sluggish recovery in the U.S. economy. Demand for chemical products takes place early in the supply chain and changes in chemical production serves as a barometer to gauge the trends in the broader economy.

The report shows that the Chemical Activity Barometer ("CAB"), the Washington-based chemical industry trade group's new macroeconomic indicator, dipped for the third consecutive month in June, suggesting economic growth to subside in the back half of 2012. It also signals a slow recovery in the domestic housing market.

The CAB composite index consists of indicators drawn from an array of chemicals and sectors associated with the production of chlorine and other alkalies, pigments, plastic resins and other selected basic industrial chemicals.

The index also factors in the stock data of chemical companies, hours worked in the industry and chemical prices. It helps in spotting the trends in the U.S. economy within sectors such as housing, retail and automobiles that are closely connected to the chemical industry.

The ACC noted that the CAB index sagged 1.3% to 88 in June following a decline of 0.7% and 0.6% in May and April, respectively. The index, which helps anticipate the peaks and valleys in the U.S. economy, registered gains in the first three months of 2012. The report also demonstrates a positive correlation between the CAB and Federal Reserve's Industrial Production index.

With respect to the various components of CAB, the production-related indicator remained flat while chemical company equities, hours worked and prices shrank. CAB's three-month moving average fell in June, signaling tepid growth prospects in the months ahead.

The ACC report further reveals a slowdown in construction-related activity as the production of chlor-alkalies and a few construction-related polymers slipped following several months of growth. The decline is significant as these chemicals are used to make a host of plastic products for housing construction.

The U.S. housing sector remains a weak end market. The domestic housing sector, a key consumer of chemicals, is likely to remain soft through 2012. Weakness in the electronics and construction end markets may weigh on the June quarter results of chemical companies including majors such as

E.I. Du Pont de Nemours & Co (NYSE:DD),
The Dow Chemical Company (NYSE:DOW),
Eastman Chemical Co. (NYSE:EMN) and
Celanese Corporation (NYSE:CE).

The chemical industry is among the biggest industries in the U.S., a roughly $760 billion enterprise, accounting for 26% of the nation's GDP. The chemical industry, by nature, is cyclical and heavily linked to the overall condition of the U.S. economy. It has been consistently leading the U.S. economy's business cycle due to its early position in the supply chain.

The U.S. chemical industry represents roughly 19% of the global chemicals output. It is responsible for 10% of the nation's merchandise exports, aggregating $145 billion annually. Chemical industry also touches 90% of manufactured goods, making the manufacturing industry the biggest consumer of chemical products. While the U.S. is yet to reach a healthy growth phase and the European economy is still in tatters, the chemical industry is well placed to reap the benefits of the emerging market tailwind in 2012 with Asia being a beacon of growth.

News Corp. Split Confirmed

It's now official: News Corp. (Nasdaq:NWSA), a 60-year old company with a market value of approximately $53 billion, will finally split into two separate publicly traded publishing and entertainment entities. The steering will remain in the hands of 81-year old veteran Rupert Murdoch, who views this as the right move, at the right time and in the right direction.

The diversified media conglomerate is spinning the newspapers, HarperCollins book publishing, its digital education operations and the integrated marketing services business. It is also and creating a much more profitable entity including Fox broadcasting, cable network, Fox News Channel, the 20th Century Fox movie studio, BSkyB, Sky Italia, Sky Deutschland, and pay-TV operations in Europe and India.

The decision to divide into two has finally brought a reason to cheer for disgruntled shareholders, who from a long time have been pressing hard to sever the publishing business.

The process of separation will likely take a year, and result in News Corporation's stakeholders receiving one share in each new company formed for each share they currently hold. Murdoch's family with approximately 40% voting right will spearhead both the companies.

Chase Carey will serve as chief operating officer of the entertainment company and maintain his present role in News Corporation. The company is yet to decide who will assume the role of CEO in the publishing company.

We believe that the breakup would help News Corporation to lift its image, which was tainted due to the phone hacking scandal that resulted in the closure of the publication of 'The News of the World' and abstinence from acquiring the remaining 61% stake in the British Sky Broadcasting Group.

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