Dow Chemical could see pressure on its ethylene margins and its electric chemical unit will face some headwinds pressure in the coming quarters, according to a Jefferies & Co.
Analyst Laurence Alexander lowered his per share earnings estimates for the fourth quarter and first quarter by five cents each to 25 cents and 58 cents, respectively, but he repeated a "hold" rating on the stock Wednesday.
Alexander said he expected rising cash costs through the first quarter to offset slightly rising polyethylene prices, and he sees the potential for European margins to erode further. Ethylene is a chemical used in industrial processes.
"All in all, we see a more muted margin recovery than what some investors are anticipating," Alexander wrote.
The analyst also said electronic chemical unit margins could be crimped in the first and possibly second quarters, and he has tempered expectations for Dow's electronics business, particularly for the fourth quarter.
Shares of Dow Chemical Co. fell 17 cents to $27.88 in premarket trading.