Chemical Stocks Drop After Bank of America Downgrades - Here's Why
Portfolio Pulse from Anusuya Lahiri
Bank of America analyst Steve Byrne downgraded several chemical stocks, including Dow Inc, Chemours Co, and Celanese Corp, due to various factors such as weak demand recovery, margin pressures, and operational headwinds. Other stocks mentioned include Huntsman Corp, Eastman Chemical Co, LyondellBasell Industries NV, Olin Corp, Westlake Corp, and Tronox Holdings Plc.
June 22, 2023 | 3:53 pm
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NEGATIVE IMPACT
Bank of America downgraded Chemours Co to Neutral from Buy, citing too ambitious earnings expectations for 2023 and ongoing destocking in Titanium dioxide.
The downgrade of Chemours Co is due to the analyst's view that the company's earnings expectations for 2023 are too ambitious, given the ongoing destocking in Titanium dioxide and weaker industrial backdrop. This is likely to put downward pressure on the stock in the short term.
CONFIDENCE 90
IMPORTANCE 80
RELEVANCE 100
NEGATIVE IMPACT
Bank of America downgraded Celanese Corp to Neutral from Buy, citing ongoing pressures from weaker margins in acetic acid and derivatives in markets outside the U.S.
The downgrade of Celanese Corp is due to the ongoing pressures from weaker margins in acetic acid and derivatives in markets outside the U.S. This is likely to put downward pressure on the stock in the short term.
CONFIDENCE 90
IMPORTANCE 80
RELEVANCE 100
NEGATIVE IMPACT
Bank of America downgraded Dow Inc to Under Perform from Neutral due to elusive demand recovery weighing negatively on prices.
The downgrade of Dow Inc is due to the lack of demand recovery in the petrochemical space, which is negatively impacting prices. This is likely to put downward pressure on the stock in the short term.
CONFIDENCE 90
IMPORTANCE 80
RELEVANCE 100
NEGATIVE IMPACT
Bank of America analyst notes that Eastman Chemical Co's destock pressure in durables and construction markets will likely last longer, and propylene margins have compressed sequentially.
The analyst's view on Eastman Chemical Co is negative due to the destock pressure in durables and construction markets likely lasting longer and the compression of propylene margins. This is likely to put downward pressure on the stock in the short term.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
Bank of America analyst sees the most risk in Huntsman Corp, with much of its revenues tied to U.S. and European construction and sliding MDI prices.
The analyst's view on Huntsman Corp is negative due to its revenues being tied to U.S. and European construction and the sliding MDI prices. This is likely to put downward pressure on the stock in the short term.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
Bank of America analyst sees a similar story for LyondellBasell Industries NV's two O&P businesses as DOW - an expected volume and price recovery is not materializing but reversing.
The analyst's view on LyondellBasell Industries NV is negative due to the expected volume and price recovery not materializing but reversing, similar to the situation with Dow Inc. This is likely to put downward pressure on the stock in the short term.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
Bank of America analyst sees Tronox Holdings Plc experiencing a lower boost to 3Q due to operational headwinds, specifically from flood waters at its mining operations in Australia.
The analyst's view on Tronox Holdings Plc is negative due to the company experiencing a lower boost to 3Q due to operational headwinds, specifically from flood waters at its mining operations in Australia. This is likely to put downward pressure on the stock in the short term.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80
NEGATIVE IMPACT
Bank of America analyst sees Westlake Corp failing to gain traction in PVC, with U.S. export prices close to their 2022 trough and domestic contract pricing expected to slide.
The analyst's view on Westlake Corp is negative due to the company failing to gain traction in PVC, with U.S. export prices close to their 2022 trough and domestic contract pricing expected to slide. This is likely to put downward pressure on the stock in the short term.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80
NEUTRAL IMPACT
Bank of America analyst acknowledges the risk of Olin Corp's U.S. caustic contract slipping further, but also notes its strong post-dividend FCF and relatively resilient earnings.
The analyst acknowledges the risk of Olin Corp's U.S. caustic contract slipping further, but also notes its strong post-dividend FCF and relatively resilient earnings. This creates a mixed outlook for the stock in the short term.
CONFIDENCE 85
IMPORTANCE 70
RELEVANCE 80