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B of A Securities analyst Matthew DeYoe raised the price forecast for Dow Inc. (NYSE:DOW) to $26 from $24, while retaining a Neutral rating.
On Thursday, the chemical company reported an adjusted loss of 19 cents per share, beating Wall Street’s consensus estimate of a 29-cent loss.
Revenue fell 8% year over year (Y/Y) to $9.97 billion, missing the $10.23 billion estimate.
Dow expects fourth-quarter 2025 net sales of approximately $9.4 billion versus the consensus of $10.2 billion.
The analyst notes that DOW’s earnings exceeded initial guidance, driven by stronger-than-expected cost-cutting momentum.
The quarterly EBIT looked even better due to low depreciation and amortization, the analyst adds.
DeYoe says that the fourth-quarter EBIT guidance of $725 million also tops the Street’s $680 million, although it suggests a polyethylene (PE) margin recovery that seems skeptical.
He writes that the impact of cost reductions is encouraging, particularly the decline in Selling, General, and Administrative expenses.
While the quarter was undoubtedly better than anticipated, DOW is “not out of the woods” yet, as global oversupply continues to limit profit expansion, adds the analyst.
Talking about the industry, DeYoe says that it is fixing balances in September by slashing operating rates from 94% to 87%, an action that conflicts with DOW’s view that “assets are going to run hard in the Americas.”
The Freeport fire will help supply, but sustained U.S. price traction requires operating rates to stay below 90%, rising rates could quickly reverse October’s price gains, adds the analyst.
Further, the analyst notes that U.S. PE export prices are down month-to-date, hurting DOW’s outlook.
DeYoe raised the fourth-quarter EBITDA estimate from $527 million to $690 million, a figure still below DOW’s official outlook.
This increase is expected to be primarily driven by a $130 million contribution from Packaging & Specialty Plastics (P&SP).
However, DeYoe believes the company’s PE margin outlook, which predicts compression of only 1 cent per pound quarter over quarter, is optimistic given the current trajectories of PE and feedstock prices and industry forecasts.
Finally, the analyst raised the 2026 EBITDA estimate from $3.64 billion to $3.71 billion a year ago.
Investors can gain exposure to the stock via Amplify ETF Trust Amplify Natural Resources Dividend Income ETF (NYSE:NDIV).
Price Action: DOW shares are up 0.53% at $24.63 at the last check on Friday.
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