BMO Capital Markets has downgraded Dow Inc from Market Perform to Underperform, indicating a sustained weakness in key segments and potential risks to earnings and dividends. Consequently, the price target has been reduced to $22, suggesting a total projected return of -11%, with shares experiencing a nearly 2% drop in premarket trading.

Critical Insights:

• Weak Market Demand: The demand across essential segments like Packaging & Specialty Plastics and Performance Materials remains muted.
• Impact of Tariffs: Ongoing trade uncertainties have adversely affected polyethylene volumes and production rates.
• Long-Term Overhangs: An oversupply from China and sluggish construction activity in both the U.S. and Europe continue to hinder market performance.
• EBITDA Forecasts:
  – Q2: Reduced to $734 million from the consensus estimate of $908 million
  – Q3: Forecast at $848 million compared to $1.13 billion consensus
  – FY2026: Projected at $3.94 billion vs. a $5.02 billion consensus outlook
• Dividend Risk: BMO indicates a heightened probability of a dividend cut if macroeconomic conditions do not improve.

"Many of the issues are structural in nature, making it challenging to anticipate a rapid rebound in earnings unless macro conditions change," commented BMO’s John McNulty.