BMO Downgrades Dow Inc (DOW) to Underperform Amid Mounting Earnings Pressure
Summary
BMO Capital Markets has downgraded Dow Inc. (DOW) from 'Market Perform' to 'Underperform', slashing its price target to $22 due to sustained weakness in key segments, tariff headwinds, and structural market overhangs like Chinese oversupply. BMO significantly cut its EBITDA forecasts for Q2, Q3, and FY2026, citing a challenging macro environment. The firm also flagged a heightened risk of a dividend cut if current headwinds persist, leading to a nearly 2% drop in DOW's premarket shares.
BMO Downgrades Dow Inc. (DOW) to Underperform Amid Mounting Earnings Pressure
Publication Date: June 24, 2025
BMO Capital Markets has significantly lowered its outlook on Dow Inc. (NYSE: DOW), downgrading the chemical giant's stock from 'Market Perform' to 'Underperform'. This revision comes as the firm anticipates persistent weakness across Dow's core business segments and identifies substantial downside risks to both future earnings and the company's dividend policy. Following the downgrade, Dow's shares experienced a nearly 2% decline in premarket trading.
BMO has also drastically cut its price target for DOW to $22, suggesting a potential total return of -11% from current levels. This bearish stance is rooted in several key factors:
Key Concerns Driving the Downgrade
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Weak End Markets: Demand remains subdued across Dow's critical segments, including Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials. This broad-based softness indicates a challenging operating environment.
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Tariff Headwinds: Ongoing trade uncertainties are negatively impacting polyethylene volumes and production run rates, adding another layer of pressure on the company's top line.
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Structural Overhangs: BMO highlights long-term structural issues, such as significant Chinese oversupply in the chemical sector and a muted construction market in both the U.S. and Europe, which are expected to act as persistent drags on Dow's performance.
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Aggressive EBITDA Revisions: BMO has substantially revised its earnings before interest, taxes, depreciation, and amortization (EBITDA) forecasts for Dow, signaling a much weaker outlook than market consensus:
- Q2 2025: Revised to $734 million (significantly below the Street's $908 million consensus)
- Q3 2025: Forecasted at $848 million (compared to the $1.13 billion consensus)
- FY 2026: Projected at $3.94 billion (a considerable reduction from the $5.02 billion consensus)
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Heightened Dividend Risk: A critical concern raised by BMO is the increased probability of a dividend cut by Dow. The firm warns that if current macroeconomic headwinds persist, the company's ability to sustain its current dividend payout could be severely compromised.
BMO analyst John McNulty underscored the severity of the situation, stating, "Many of the issues are structural in nature, making it difficult to have a snap-back in earnings barring a macro bounce."
Deeper Financial Analysis Tools
For investors seeking to conduct their own in-depth analysis of Dow's financial health and future prospects, several powerful tools are available:
Dive Deeper with Financial Forecast Data
Understanding Dow's earnings and EBITDA trends is crucial for adjusting valuation models and tracking performance during downturns. The Financial Growth API provides year-over-year and quarter-over-quarter growth metrics for revenue, EBITDA, and net income, offering essential insights into the company's financial trajectory.
Evaluate Cash Flow Strength via Owner Earnings
Assessing dividend sustainability requires a clear picture of a company's true cash generation. The Owner Earnings API reflects the real cash flow capacity of a business after capital expenditures. This tool is ideal for identifying potential dividend risks or validating payout ratios, especially during periods of earnings stress.