NewMarket Volume Growth Disappoints, Longbow Downgrades To Neutral

Longbow Research downgraded NewMarket Corporation (NYSE: NEU) to Neutral from Buy as volume growth failed to materialize and margins look stagnant.

According to the analysts, petroleum additives volume declines being experienced by NewMarket appear to be company specific; they have no plausible rationale to believe the trend will reverse in 2H16.

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The company reported 2Q16 adjusted EPS of $5.50, beating Longbow's estimate of $5.43. "Expectations of higher additive prices in 2H16 along with the modest increase in base oil costs seen in 2Q16 suggest a more challenging margin environment for ASH and other lube producers," the analysts said.

The analysts reduced their EPS estimates for 3Q16, 4Q16 to $5.35 (from $5.77) and $4.41 (from $4.88), respectively.

At time of writing, NewMarket Corporation was trading at $430, down 2.37 percent on the day.

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