BofA Analyst's Chemical Blend: Rating Change Saga, Reassesses Agricultural Market Dynamics

Celanese Corporation Class A -0.55%
E. I. du Pont de Nemours and Company -0.07%
Dow Chemical Company -0.89%
Ecolab Inc. +2.30%
FMC Corporation +5.49%

Celanese Corporation Class A

CE

0.00

E. I. du Pont de Nemours and Company

DD

0.00

Dow Chemical Company

DOW

0.00

Ecolab Inc.

ECL

0.00

FMC Corporation

FMC

0.00

BofA Securities analyst Steve Byrne said he was bullish on commodity chemical stocks but remained selective given a tough recovery and leans “this way with lithium, as well.”

The analyst expected residential and non-resi investments to remain soft, with more resilience in aerospace and auto and a continued focus on decarbonization and water management.

Consequently, the analyst issued an upgrade for Dow Inc (NYSE:DOW) to Buy from Hold with an increased price target of $60 from $57, expecting the company to witness EBITDA growth of ~50% by 2025 (vs. 2023). 

On the other hand, the analyst gave Celanese Corporation (NYSE:CE) a downgrade to Underperform from Neutral with an increased price target of $135 from $124. Given the 56% return in 2023, he sees the shares more than fully discount the expected earnings recovery.

Apart from this, the analyst stated the agricultural (ag) markets are entering normalized earnings at a lower part of the cycle, with farmer margins expected to be flat Y/Y in 2024 but still above pre-2021 levels.

As the outlook for crop chemicals remains sluggish, the analyst downgraded FMC Corp (NYSE:FMC) to Underperform from Neutral with a lowered price target of $57 from $60 on lack of conviction about a near-term earnings recovery.

Among the other petrochemical/diversified companies, the analyst lowered the rating on DuPont de Nemours Inc (NYSE:DD) to Underperform from Buy with a higher price target of $80 from $78, reflecting modest earnings recovery in 2024 and under-appreciated PFAS liabilities. 

Meanwhile, the analyst issued an upgrade for Ecolab Inc (NYSE:ECL) to Neutral from Underperform and raised the price target to $216 from $185 on expected continued benefit from aggressive pricing, business wins, cost deflation and focus on productivity.

Overall, for U.S/ chemicals stocks, the analyst moderately reduced the earnings estimates, with EPS lowered by an average of 3% for the fourth quarter of FY23 and 6% for FY24.

Photo: Shutterstock

Every question you ask will be answered
Scan the QR code to contact us
whatsapp
Also you can contact us via