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Investing.com - BofA Securities has reiterated its Underperform rating and $27.00 price target on Dow Inc. (NYSE:DOW), currently trading at $27.76, following the company’s announcement of European facility closures. The chemical giant, which offers a notable 9.84% dividend yield, has seen its stock decline over 41% in the past year. According to InvestingPro analysis, the stock appears undervalued at current levels.
Dow announced it will close three European operations, including a smaller ethylene cracker in Böhlen, Germany, a small chlor-alkali complex in Schkopau, Germany, and a larger siloxanes operation in Barry, UK.
The closures come as chemical companies adjust their operations in response to significant capacity investments from China that are still being absorbed by the industry, according to BofA Securities.
The investment firm noted that European operations have become increasingly unfavorable for chemical companies due to higher energy costs and increased regulatory scrutiny.
No update was provided on Dow’s European polyurethanes business, which remains under review, with BofA Securities suggesting that buyer interest in that business "may be tepid."
In other recent news, Dow Inc. announced plans to shut down three upstream assets in Europe, citing structural challenges in the region. This decision is expected to impact approximately 800 roles and result in charges between $630 million and $790 million. The company anticipates an EBITDA uplift of $200 million by 2029 due to these closures. Additionally, Mizuho (NYSE:MFG) maintained its Neutral rating on Dow but lowered its price target to $31, citing ongoing challenges in the chemicals sector, particularly with polyethylene pricing. Mizuho also reduced its second-quarter EBITDA estimate for Dow to $797 million, reflecting a 16% decrease. Meanwhile, BMO Capital downgraded Dow from Market Perform to Underperform, reducing the price target to $22, due to weak market conditions affecting the company’s financial performance. In legal developments, a Canadian court ordered NOVA Chemicals to pay Dow approximately USD$1.2 billion in additional damages related to a jointly owned ethylene asset. This judgment follows a previous payment to Dow in 2019 and is subject to appeal.
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