Bank of America downgrades US chemical stocks following price rally
Why it matters: Bank of America's downgrades could signal a shift in investment sentiment for DOW, LYB, and WLK, impacting their stock performance.
- Bank of America downgraded Dow Inc (NYSE:DOW) and LyondellBasell Industries NV (NYSE:LYB) to 'Underperform' and Westlake Chemical (NYSE:WLK) to 'Neutral'.
- The downgrades follow significant year-to-date share price rallies of 60% to 80% for the chemical companies.
- Bank of America analysts attribute recent gains to 'unsustainable tailwinds' from the Iran conflict, expecting fundamentals like oversupply to reassert pressure.
- Despite downgrades, Bank of America raised earnings forecasts and price targets for LYB to $68, DOW to $35, and WLK to $119, reflecting current market conditions and higher energy prices.
- Analysts project investor focus will shift from elevated near-term profits to more 'normal' earnings profiles by 2027 and 2028, with potential global oversupply if regional conflicts resolve without structural capacity changes.
Bank of America has downgraded major US chemical stocks, including Dow Inc, LyondellBasell Industries NV, and Westlake Chemical, to 'Underperform' or 'Neutral,' despite raising their earnings forecasts and price targets. The bank believes recent share price rallies of 60-80% are unsustainable, driven by temporary market factors like the Iran conflict, and anticipates a return to focus on fundamental issues like oversupply and downward petrochemical price pressure by 2027-2028.
