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Investing.com - Evercore ISI downgraded Dow Inc. (NYSE:DOW) from Outperform to In Line on Friday, slashing its price target to $32.00 from $56.00 amid concerns about the company’s outlook following a dividend cut. The stock, currently trading near its 52-week low of $24.37, has seen a steep 49% decline over the past year. According to InvestingPro data, 12 analysts have recently revised their earnings expectations downward.
The research firm cited the recent dividend reduction, which adds financial flexibility but raises questions about the sustainability of what it described as a "lackluster outlook" and limited visibility on recovery prospects. Despite the cut, the stock still offers a significant 11.17% dividend yield, though InvestingPro analysis indicates the company operates with weak gross profit margins of 9.56% and trades at a concerning P/E ratio of 61.34x.
Evercore noted that a weaker-than-anticipated bridge to the third quarter likely fueled investor concerns about the sustainability of the reduced dividend and capital program, particularly given the unimpressive setup for 2026.
The firm’s third-quarter guidance came in 17% below Evercore’s estimate, which was already 5% below the Street consensus, highlighting significant underperformance despite polyethylene prices settling 3 cents per pound higher in June.
Evercore expressed skepticism about Dow’s forecast, which assumes an optimistic 6 cents per pound increase in polyethylene prices for July without sequential improvement in operating rates and amid turnaround headwinds.
In other recent news, Dow Inc. announced a significant reduction in its quarterly dividend, cutting it by 50% to 35 cents per share. This decision comes in response to a challenging macroeconomic environment and a prolonged downturn in the industry. Additionally, Moody’s Ratings downgraded Dow’s senior unsecured credit rating to Baa2 from Baa1, citing depressed earnings and weakened credit metrics. The outlook remains negative, with governance concerns highlighted as a contributing factor. In another development, Dow plans to shut down three European operations, including facilities in Germany and the UK, to address structural challenges in the region. This move is expected to result in a $200 million EBITDA uplift by 2029. BofA Securities has reiterated its Underperform rating on Dow stock, maintaining a price target of $27.00, following these announcements. These closures will impact approximately 800 roles as Dow seeks to improve its profitability in Europe.
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