Bank of America Securities upgrades BofA to Neutral, raises PT to $25.

Bank of America Securities upgrades BofA to Neutral, raises PT to $25.

Bank of America Securities (BofA) has upgraded its rating for Dow Inc. (NYSE: DOW) to Neutral, setting a new price target of $25.00. The chemical giant has faced significant challenges in the past six months, with its shares declining by over 38% [1]. The upgrade comes as BofA reassesses Dow’s position at what it considers a cycle trough, where investors typically benchmark to normalized EBITDA. The firm estimates this figure at approximately $7 billion, falling short of the $9 billion outlined at Dow’s 2024 Investor Day [1].

BofA identified two 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. These challenges are industry-wide rather than Dow-specific issues [1].

Despite these challenges, Dow is working to reposition its global footprint. The company’s European polyurethanes strategic review remains in progress, with the next update expected soon. For deeper insights into Dow’s financial health and strategic positioning, including 10+ additional ProTips and comprehensive valuation metrics, visit InvestingPro [1].

In other recent news, Fitch Ratings downgraded Dow’s Long-Term Issuer Default Rating to 'BBB' from 'BBB+', citing 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. 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 [1].

These recent developments highlight varied analyst perspectives on Dow’s future performance. Despite the challenges, the upgrade by BofA reflects a more positive outlook on the company’s ability to navigate through the current headwinds and reposition itself for future growth.

References:
[1] https://au.investing.com/news/analyst-ratings/dow-stock-rating-upgraded-by-bofa-securities-to-neutral-from-underperform-93CH-3979024