Benzinga - by Lekha Gupta, Benzinga Editor.
KeyBanc Capital Markets analyst Aleksey Yefremov upgraded Dow Inc. (NYSE: DOW), Westlake Corp (NYSE: WLK) , and LyondellBasell Industries NV (NYSE: LYB) to Sector Weight from Underweight.
The analyst notes a 20%+ rise in crude oil over the last three months has increased the floor prices for PE, PVC, and other base chemicals.
The analyst sees lower downside risk for the stocks as higher naphtha costs force competitors in Asia and Europe to raise prices.
Also, integrated ethylene/PE margins in Asia are close to cycle lows on higher crude oil prices, making the further decline in PE prices unlikely, notes the analyst.
Yefremov sees PE markets continue to be oversupplied in FY24 but thinks a steeper cost curve and improvement in demand can drive earnings.
The analyst believes valuations are attractive for these stocks and expects FY24 volumes to be much less affected by destocking than in FY23.
However, the analyst sees the demand outlook for chemicals and earnings recovery as gloomy, heading into a seasonally soft Q4, as demand recovery in China is weak, and Europe is "stuck" at a low level.
Also, the analyst believes potential weakness in crude oil can deteriorate macro conditions in FY24.
For DOW, the analyst estimates EBITDA and EPS of $5,725 million and $2.50 for FY23.
For LYB, Yefremov sees FY23 EBITDA and EPS of $5,501 million and $8.84.
For WLK, EBITDA and EPS are estimated to be $2,678 million and $8.38.
Price Action: DOW shares are trading lower by 0.56% at $51.01, WLK up by 0.19% at $123.09, and LYB up by 0.32% at $93.75 on the last check Tuesday.
Latest Ratings for DOW
| Jan 2022 | Goldman Sachs | Maintains | Neutral | |
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