Wall Street is warming up to commodity chemical giant
The combination of strong demand and the impact from the recent Winter Storm Uri supply will drive upside to earnings in [the coming year],” Sison wrote in his research report. Roughly 75% of U.S. commodity chemical capacity was shut the week of the storm, according to the analyst. The lack of production will more than offset any early-year demand weakness experienced by the industry.
What’s more, “Dow has several commodity chains moving in the right direction,” he adds. Chemicals can be complicated, and any commodity chemical maker manufactures several products from oil-based inputs. All the products—commonly referred to as chains—have slightly different supply and demand characteristics. For Sison, polyethylene and polyurethane markets look promising. Polyethylene is, essentially, flexible plastic. Polyurethanes find their way into myriad construction and automotive applications.
Sison’s ratings change is the second upgrade of Dow stock in the past few days, although that upgrade—from BofA Securities analyst Steve Byrne—was to Hold from Sell. Barron’s wrote positively about the company in this week’s Trader column, arguing the dividend yield was attractive and the company will benefit from an improving economy.
For now, the Street seems to side with Byrne versus Sison. Analysts, overall, are cautious on the stock. About 30% of analysts covering the company rate shares Buy. The average Buy-rating ratio for stocks in the
Dow Jones Industrial Average
is about 57%. But the Buy-rating ratio for Dow shares was only 24% at the start of the year. Back then, three analysts rated Dow shares Sell. Now only two do. The tide appears to be slowing shifting.
Dow stock is up 2.6%, at $63.17, in recent trading. The
is down 0.4%. Dow shares have had a strong start to the year, rising about 14%.
Write to Al Root at firstname.lastname@example.org