Credit Suisse's John McNulty Expects Chemical Industry Revenue to Increase 7% in 2011

Shares of Dow Chemical and other industry rivals rallied on the first trading day of the year after a leading chemical analyst raised several price targets and posted bullish industry expectations for 2011.

"We believe investors would be wise to remain in the chemical space in 2011 as there are a number of factors that are likely to drive the group's earnings and stocks solidly higher over the next 12 to 18 months," Credit Suisse analyst John McNulty wrote in a research note.
Increasing exports to emerging markets, improving balance sheets and cash flow, and commodity inflation should help lift the industry in 2011, said McNulty, who expects industry revenue to increase 7% this year.

Dow, Celanese Corp and Rockwood Holdings offer investors the "most compelling risk-reward" profile, McNulty said. McNulty raised his price target on Dow to $44 from $38, calling it is "top large-cap pick in the chemical space."

Shares of Dow, based in Midland, Mich., jumped 2.9% to $35.14 in late morning trading.

For Celanese, which makes the building blocks for cigarette filters, paints and adhesives, McNulty raised his price target to $55 from $44.
Shares of Celanese rose 3.8% to $42.75.

Shares of commodity chemical producer Rockwood rose 3.8% to $40.61. McNulty raised his target on that company to $51 from $47.
Credit Suisse also boosted its target on Ashland, which owns the iconic Valvoline oil change business, among other properties, to $69 from $62.

Ashland shares rose 3.3% to $52.55.