is one of three chemicals stocks that KeyBanc downgraded, noting a “petrochemical recession Is likely upon us.”
Aleksey Yefremov cut his rating on Dow (ticker: DOW) stock to Underweight from Sector Weight with a below-market price target of $45. The analyst also downgraded both
(WLK) stock to Underweight from Sector Weight, and set price targets of $73 and $90, respectively, which are also below where the shares are currently trading. Yefremov cited a downside in polyethylene prices, Dow’s decision to cut polyethylene production, and weakening demand in polyethylene markets as reasons for his moves.
Petrochemical products include plastics, cosmetics and appliances. Polyethylene a commonly produced plastic.
“In addition to improving supply, global demand is also falling, compared to relatively robust [second quarter] run rate,” Yefremov wrote in a research note. “Producers are facing higher energy costs not only in Europe, but to a lesser degree in the U.S.”
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Yefremov also wrote that global container rates are falling, which is “likely to further facilitate reduction in U.S. commodity price premiums that producers enjoyed over the last 12 to 18 months.” Because of all of this, Yefremov said that he finds “more downside risks to commodity stocks in the near term.”
“We expect [fourth quarter 2022] margins and earnings to approach ‘trough’ or ‘recession’ levels, while we move to sub-normalized 2023 estimates,” Yefremov also wrote.
For Dow specifically, Yefremov cited the commodity chemicals producer’s recent announcement in a customer letter that it plans to cut global polyethylene operating rates by 15%. Yefremov said that he believes LyondellBasell and
“are likely to follow suit in reducing polyethylene and other production.”
Dow stock is 3.4% lower to $52.62 in Monday morning trading, compared with an 0.7% drop in the
S&P 500 index . Coming into Monday trading, the stock has fallen 4% this year. Shares of LyondellBasell were 3.0% lower early Monday while Westlake fell 2.6%.
Dow Inc., LyondellBasell and Westlake Get ‘Petrochemical Recession’ Downgrades
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Dow recently announced plans to cut its global polyethylene operating rates by 15%.
Jeff Kowalsky/Bloomberg
Dow Inc.
is one of three chemicals stocks that KeyBanc downgraded, noting a “petrochemical recession Is likely upon us.”
Aleksey Yefremov cut his rating on Dow (ticker: DOW) stock to Underweight from Sector Weight with a below-market price target of $45. The analyst also downgraded both
LyondellBasell Industries
(LYB) and
Westlake
(WLK) stock to Underweight from Sector Weight, and set price targets of $73 and $90, respectively, which are also below where the shares are currently trading. Yefremov cited a downside in polyethylene prices, Dow’s decision to cut polyethylene production, and weakening demand in polyethylene markets as reasons for his moves.
Petrochemical products include plastics, cosmetics and appliances. Polyethylene a commonly produced plastic.
“In addition to improving supply, global demand is also falling, compared to relatively robust [second quarter] run rate,” Yefremov wrote in a research note. “Producers are facing higher energy costs not only in Europe, but to a lesser degree in the U.S.”
Newsletter Sign-up
Review & Preview
Every weekday evening we highlight the consequential market news of the day and explain what’s likely to matter tomorrow.
Yefremov also wrote that global container rates are falling, which is “likely to further facilitate reduction in U.S. commodity price premiums that producers enjoyed over the last 12 to 18 months.” Because of all of this, Yefremov said that he finds “more downside risks to commodity stocks in the near term.”
“We expect [fourth quarter 2022] margins and earnings to approach ‘trough’ or ‘recession’ levels, while we move to sub-normalized 2023 estimates,” Yefremov also wrote.
For Dow specifically, Yefremov cited the commodity chemicals producer’s recent announcement in a customer letter that it plans to cut global polyethylene operating rates by 15%. Yefremov said that he believes LyondellBasell and
Westlake
“are likely to follow suit in reducing polyethylene and other production.”
Dow stock is 3.4% lower to $52.62 in Monday morning trading, compared with an 0.7% drop in the
S&P 500 index
.
Coming into Monday trading, the stock has fallen 4% this year. Shares of LyondellBasell were 3.0% lower early Monday while Westlake fell 2.6%.
Write to Angela Palumbo at [email protected]
Source: https://www.barrons.com/articles/dow-stock-lyondellbasell-chemicals-downgrade-51661781336?siteid=yhoof2&yptr=yahoo