Dow Inc. and LyondellBasell Stock Would not Outperform Shortly, Claims J.P. Morgan

Then before this 7 days, an analyst from KeyBanc downgraded commodity-chemical producers together with Dow (ticker: DOW) and LyondellBasell (LYB) to Underweight from Sector Body weight, and wrote that a “petrochemical economic downturn Is very likely on us.”

These days, J.P. Morgan’s Zekauskas downgraded the two Dow and LyondellBasell to Neutral from Chubby, citing a decrease in commodity-chemical charges and demand from customers slowing as explanations for his downgrades. He also lower the price targets on Dow and LyondellBasell to $47 and $80, respectively, from $60 and $115, respectively.

“We think it is not likely that Dow and LyondellBasell will outperform the industry in the coming weeks,” Zekauskas wrote in a investigate note.

Zekauskas wrote that spot rates of polyethylene have been slipping each in the domestic and offshore marketplaces. He also extra that demand from customers from China for plastics “remains really sluggish” and European demand from customers “is weak as the purchaser is saddled with higher strength and electricity costs.”

In spite of the downgrades, “both providers offer you dividend yields earlier mentioned 5.5%, which we believe secure,” Zekauskas wrote. He included, “Both businesses are probable to provide absolutely free dollars flow yields earlier mentioned 10% in 2023. Each corporations have great harmony sheets. We are unwilling to Underweight the two firms for these factors. Both of those LyondellBasell and Dow, in our viewpoint, replicate great value that is unlikely to be recognized shorter-time period towards a background of destructive shorter-expression earnings momentum.”

Dow inventory is down .1% Friday to $49.91, and Lyondell stock is .2% lessen. The

S&P 500
received .6% Friday.

Create to Angela Palumbo at angela.palumbo@dowjones.com