Dow stock rating upgraded by BofA Securities to Neutral from Underperform

Investing.com - BofA Securities upgraded Dow Inc. (NYSE:DOW) from Underperform to Neutral on Thursday, setting a price target of $25.00. The chemical giant, currently valued at $16.25 billion, has seen its shares decline over 38% in the past six months, according to InvestingPro data.

The upgrade comes as BofA analyst Steve Byrne reassessed Dow’s position at what the firm considers a cycle trough, where investors typically benchmark to normalized EBITDA. BofA estimates this figure at approximately $7 billion, falling short of the $9 billion outlined at Dow’s 2024 Investor Day. Current EBITDA stands at $3.86 billion, while the company maintains a notable 6.11% dividend yield despite challenging conditions.

The research firm identified two continuing structural headwinds facing Dow. First, planned capacity additions in China over the next three years are expected to negatively impact asset utilization rates for many of Dow’s commodity products, particularly polyethylene, siloxanes, and propylene oxide.

Second, BofA considers Dow’s European asset base "arguably permanently impaired" due to higher costs and slower demand in the region. The firm noted these challenges are industry-wide rather than Dow-specific issues.

Dow is working to reposition its global footprint in response to these challenges, with the next update expected from the company’s European polyurethanes strategic review, which remains in progress. For deeper insights into Dow’s financial health and strategic positioning, including 10+ additional ProTips and comprehensive valuation metrics, visit InvestingPro.

In other recent news, Dow Inc. has experienced a series of significant developments. Fitch Ratings downgraded Dow’s Long-Term Issuer Default Rating to ’BBB’ from ’BBB+’ due to weak operating performance and soft demand in the construction and automotive sectors. Rothschild Redburn, however, upgraded Dow’s stock to Buy, citing potential recovery in polyethylene margins, and adjusted the price target to $40.00. On the other hand, BMO Capital maintained an Underperform rating on Dow and lowered its price target to $20.00, pointing to a weak petrochemical market and uncertainty about stabilization. RBC Capital also reduced its price target for Dow to $26.00, expressing concerns over optimistic polyethylene price assumptions. Evercore ISI downgraded Dow to In Line, reducing its price target to $32.00 amid concerns about the company’s outlook following a dividend cut. These recent developments highlight varied analyst perspectives on Dow’s future performance.

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