Dow downgraded to Hold at Jefferies on lower earnings estimates

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Dow Inc. (NYSE:DOW) on Tuesday was downgraded to Hold from Buy at Jefferies on the expectation of lower earnings and revenue this year. The investment bank lowered its price target for the U.S. chemical company to $45 a share from $71.

Dow slipped 3.1% in premarket trading, compared with a 2% slump for S&P 500 futures.

Jefferies lowered its Q3 EPS estimate for Dow to $1.49 from $1.61 amid risks that include lower demand for the chemical producer’s products, capacity additions from competitors and the possibility of higher interest rates as the Federal Reserve works to reduce inflation.

“A better entry point will likely be flagged by either valuation multiples low enough to support a potential triple over the next cycle,” Laurence Alexander, analyst at Jefferies, said in a research note.

A price of $35 to $43 a share is a better entry point, unless there’s “a persuasive turn” in global economic indicators after a second or third round of interest rate cuts, the report said.

Dow last month said in a letter to customers that it was temporarily cutting polyethylene operating rates by 15%. The company cited global supply-chain constraints and conditions in Europe, Dow Jones reported.

Jefferies – EPS estimates for Dow (DOW) (Sept. 13)
2022 New Old
Q3 $1.49 $1.61
Q4 $1.71 $1.99
FY $7.85 $8.25

Seeking Alpha contributor Brett Ashcroft Green has a Buy rating on Dow (DOW) because of its dividends. Columnist Yannick Frey rates Dow (DOW) as a Buy on its valuation and planned buybacks.