There is no hope for profit recovery in the next two years! BMO downgrades chemical giant LyondellBasell (LYB.US) to "underperforming the market" and warns that the stock price may continue to be under pressure.

BMO Capital Markets has downgraded its stock rating for LyondellBasell (LYB.US) from "in line with the market" to "underperform the market", and warns that the escalating pressures of commodities and finances may continue to drag down this chemical group until 2026. BMO has lowered its target price for the stock from $48 to $36, stating that this valuation reflects the ongoing challenges related to soft commodity demand, compressed profit margins, and a lack of short-term catalysts for improvement. LyondellBasell, founded in 2000, is the world's largest producer of polypropylene and a leader in polyolefin technology, with products including epoxy-derived materials, biofuels, and polypropylene compounds widely used in industries such as automotive, electronics, packaging, and medical. BMO analyst John McNairty points out that the worsening fundamentals of key commodity markets have exceeded previous expectations, limiting the possibility for substantial profit recovery for the company in 2026 or 2027. The analyst adds that despite management's efforts to improve the balance sheet, these conditions may continue to weigh on LyondellBasell's stock price. Management has recently taken a more conservative financial stance, which BMO believes provides support for potential dividend cuts, aimed at strengthening free cash flow and improving credit metrics. However, the analyst also notes that these defensive measures may struggle to offset the broader structural challenges facing the business.