By Avi Salzman
Dow Chemical (DOW) is built to thrive in a strong economy, “because Dow benefits from vertical integration, the leverage of its fixed costs when operating rates rise, and margin expansion from growth in higher-margin differentiated products,” writes JP Morgan analyst Jeffrey Zekauskas.
With the economy struggling, however, Dow’s structure is less advantageous, Zekauskas argues. And Dow is still relatively expensive — the priciest of the North American petrochemical companies, he says.
He dropped his rating to Neutral from Overweight.
If you must have exposure to the sector, Zekauskas has other ideas.