Wells Fargo upgrades Celanese on better earnings prospect

Investing.com -- Wells Fargo upgraded Celanese (NYSE:CE) Corp to Overweight. While it lowered earnings forecasts for Dow Inc (NYSE:DOW) and LyondellBasell Industries (NYSE:LYB) amid continued near-term weakness in commodity chemicals.

Though analysts say there a possible inflection point in the second half of the year.

The brokerage said most commodity markets remain under pressure due to tariffs and soft demand. Polyethylene (PE) and chlor-alkali were highlighted as particularly challenged segments.

Wells raised its price target on Celanese to $66 from $45, pointing to expected sequential earnings improvement driven by cost savings and reduced maintenance activity. The stock has fallen about 70% from its April 2024 high, and is now trading at a discount to its mid-cycle valuation.

“We see potential for sequential EPS improvement on cost savings and reduced maintenance, outlook assumes no demand improvement near term,” the analysts wrote.

At the same time, Wells Fargo cut its estimates for Dow and Lyondell, citing a weaker-than-expected April for the PE market.

Although both firms have announced price hikes for June and July, WF said these may be difficult to realize without clarity on tariff policy.

Still, the firm maintained its Overweight ratings on both Dow and Lyondell, pointing to low valuations, sensitivity to rising oil prices, and the potential for pricing momentum if trade headwinds ease.

Higher oil prices, which have spiked since June 12 following renewed tensions between Israel and Iran, are typically supportive of chemical pricing, Wells noted.

In other segments, the bank said specialty chemicals with exposure to construction and autos continue to face low volumes, while demand in consumer markets remains soft amid broader macroeconomic uncertainty.

Wells in its note said was more positive on agricultural chemicals on strong seasonal demand, higher corn acreage, and firm fertilizer prices supported by ongoing supply constraints.