Corporates are facing new challenges, including the Russia-Ukraine war, COVID outbreaks in China, rising energy prices, interest rate hikes, and new supply chain disruptions, some of which could materialize into new headwinds, according to BofA Securities.
The Chemicals Analyst: Steve Byrne upgraded three stocks and downgraded three others.
Upgrades
- Sherwin-Williams Co (NYSE:SHW) – upgraded from Neutral to Buy, while reducing the price target from $325 to $296.
- Ecolab Inc. (NYSE:ECL) – upgraded from Neutral to Buy, while reducing the price target from $210 to $196
- Univar Solutions Inc (NYSE:UNVR) – upgraded from Underperform to Buy, while raising the price target from $32 to $41
Downgrades
- FMC Corp (NYSE:FMC) – downgraded from Buy to Underperform, while keeping the price target unchanged at $128
- LyondellBasell Industries NV (NYSE:LYB) - downgraded from Neutral to Underperform, while raising the price target from $107 to $108
- Venator Materials PLC (NYSE:VNTR) - downgraded from Neutral to Underperform, while reducing the price target from $2.50 to $2.00
Also Read: Why Does BofA Analyst Like Deutsche Bank Stock?
The Chemicals Thesis: Despite the new set of headwinds, there seems to be a “stronger for longer” backdrop in commodity markets, Byrne said in the note.
“While raw material cost pressures are unlikely to relinquish near-term, we expect Sherwin and Ecolab to outperform other specialty chems with resilient end markets and pricing power,” the analyst wrote. “We upgrade Univar to Buy on a shift toward more specialty products.”
“Among the petchems, we favor the chlor-alkali producers over polyolefins, in spite of higher oil, owing to global pricing strength and less near-term capacity additions – LYB lowered to Underperform,” Byrne noted. He added that the ratings for FMC and Venator Materials had been downgraded due to “continued negative free cash flow.”
