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Bear of the Day

Methanex Corp. (MEOH) is the world's largest supplier of methanol. Lower methanol pricing and an increase in global inventories are negatively affecting the company. Methanex's Chilean facility is currently operating at 60% due to the lack of natural gas supply.

Although the company reversed year-ago losses in the second quarter of 2010, it missed the Zacks Consensus by $0.04. Methanex has a long history of underperforming the Zacks Consensus Estimate. The company projects a further sales decline and higher costs in the upcoming quarter due to production outages at the Atlas plant.

Methanol prices are expected to be volatile owing to the upcoming additional methanol capacity in the industry in 2010. We are downgrading the stock to Underperform from the previous Neutral recommendation and reduce our target price to $20.00 from $27.00.

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