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Investing.com -- BMO Capital Markets has downgraded Dow Inc (NYSE:DOW) shares to Underperform from Market Perform, citing sustained weakness across key end markets and mounting pressure on financials.
The firm also lowered its price target to $22 from prior levels, implying a total return of -11%.
Shares in Dow fell around 2% in premarket trading Monday.
Analyst John McNulty pointed to “significant weakness across its end-markets resulting in soft pricing” and lower volumes/operating rates. This is expected to weigh heavily on second-quarter EBITDA and drive a material downward revision to second-half estimates.
For 2026, BMO projects EBITDA to come in roughly $1 billion below consensus, barring a notable shift in macro conditions or major supply rationalization.
BMO notes that Dow’s Packaging (NYSE:PKG) & Specialty Plastics segment has been hit by tariff-driven uncertainty, particularly impacting polyethylene volumes.
April saw operating rates pull back by more than 10%, and despite some recovery, the firm expects an incremental $200–250 million impact from lower pricing and reduced run rates.
In other segments, demand trends also remain soft. Construction activity in the U.S. and Europe continues to slow, with high mortgage rates suppressing building permits and further weakening demand for consumer durables.
These pressures are expected to subtract an additional $30–50 million in quarter-over-quarter earnings in the Industrial Intermediates & Infrastructure business. Weakness in siloxanes and coatings also persists in Performance Materials & Coatings.
“Many of the issues are structural in nature (e.g., Chinese over capacity), making it difficult to have a snap-back in earnings barring a macro bounce,” the note stated.
BMO now sees second-quarter EBITDA at $734 million, down from the Street’s $908 million estimate.
For the third quarter, the firm expects $848 million versus consensus of $1.13 billion.
Full-year 2026 EBITDA is projected at $3.94 billion, well below consensus of $5.02 billion.
Despite actions taken to support cash flow, BMO also flagged the potential risk to the dividend. “With no end in sight for these anemic earnings levels, there appears a heightened risk DOW may cut the dividend,” the broker warned.