Although Dow Inc (NYSE: DOW) is among the most diversified pure-play commodity companies, most of its businesses have come under pressure in 2019 due to persistent global trade issues — and a meaningful recovery is unlikely this year, according to BMO Capital Markets.
Most of Dow’s operations are expected to witness continued pressure, McNulty said in a Monday downgrade note. (See his track record here.)
At the company’s PMC segment would continue to be under pressure, 35 percent of Dow's silicones portfolio has exposure to tough pricing dynamics and weaker-than-expected demand for architectural coatings, the analyst said.
In II&I segment, APAC MEG prices have been on the decline and there has been continued weakness in MDI/TDI pricing across geographies, McNulty said.
"In P&SP, the U.S. should benefit from the price hike seen in April and continued low ethane prices, with Europe being stable, although with the plethora of new supply coming online, we continue to see margin compression as a risk," the analyst said.
Dow has indicated that Chinese tariffs should have an EBITDA impact of $80-$100 million, up from a prior estimate of $40-$50 million, according to BMO.
Although this may seem small compared to Dow’s total EBITDA, the associated macro risk remains high, with consumer confidence, demand and consumption waning and capital allocation being postponed, leading to lower macro growth, McNulty said.
BMO lowered its the EBITDA estimates for 2019, 2020 and 2021 to $7.67 billion, $8.55 billion and $9.5 billion, respectively, while reducing the EPS estimates to $3.99, $4.82 and $5.75, respectively.
Dow shares were falling by 3.64% to $49.29 at the time of publication Monday.
10 Biggest Price Target Changes For Monday
Benzinga's Top Upgrades, Downgrades For June 17, 2019
Latest Ratings for DOW
|Jun 2019||Downgrades||Outperform||Market Perform|
|Apr 2019||Initiates Coverage On||Hold|
View More Analyst Ratings for DOW
View the Latest Analyst Ratings
See more from Benzinga
- Baird: Broadcom Lowers Full-Year Revenue Outlook On High Channel Inventory
- BMO: Union Pacific On Track For Higher-Than-Expected Cost Savings
- KeyBanc Hikes Atlassian Price Target, Sees Potential For Sustained 30% Subscription Revenue Growth
© 2019 Benzinga.com. Benzinga does not provide investment advice. All rights reserved.