Falling chemical profits are pressuring DowDuPont.

DowDuPont Inc. (DWDP)  shares slipped on Wednesday, Sept. 26, after equity researcher Nomura downgraded the chemicals giant to reflect "noticeably lower commodity earnings" in the second half of the year.

Nomura analysts Aleksey Yefremov and Matthew Skowronski lowered DowDuPont's rating from Buy to Neutral and cut its price target to $76 per share, down from $81 a share.

"It wouldn't be a surprise to investors that estimates need to come down, given the recent rise in ethane feedstock, and lower ethylene/ [polyethylene] margins in Europe," the Nomura analysts wrote in a research note. "In addition to lower ethylene/PE margins in the U.S. and Europe, our new estimates for DWDP reflect weaker [methyl di-p-phenylene isocyanate] margins in the second half of 2018 and 2019."

Methyl di-p-phenylene isocyanate, or MDI, is consumed mainly in rigid foams, which are used mostly in construction, packaging, refrigeration and insulation.

That said, Yefremov and Skowronski said they still view DowDuPont's strategy "as compelling" and believe the shares will be more attractive as the company approaches the spinoff of Dow Chemical in April 2019.

"We still view DWDP as an attractive core holding in large-cap chemicals but believe more patience will be required," the analysts said.

DowDuPont is expected to report third-quarter financial results on Nov. 2, with anticipated adjusted earnings of 72 cents per share on revenue of $20.22 billion, according to FactSet.

Shares of DowDuPont fell 1.7% to $66.77 at 10:05 a.m. New York time.

Last week the company, which is based in both Midland, Michigan, and Wilmington, Delaware, announced its leadership structure for when DowDuPont splits into three publicly-traded companies. Chief Executive Officer Edward Breen is set to transition to the executive chairman role of the specialty products business, which will be the new DuPont. Marc Doyle, the current chief operating officer of the specialty products division, will become the CEO.

Meanwhile, James Collins Jr., the current COO for the agriculture division, will become CEO of Corteva Agriscience, which is expected to be spun off by June 2019. And Jim Fitterling is poised become CEO of the new Dow, which is comprised of the materials science division and is expected to be separated by April 2019.

"Marc and Jim are highly qualified executives who have an unparalleled depth of knowledge and expertise in their respective businesses," Breen said in a statement. "I am confident they are the right leaders to drive each company forward and capitalize on the tremendous value creation opportunity ahead for all our stakeholders - including shareholders, customers, employees, and partners."

While the leadership structure is in place, Jim Cramer, whose Action Alerts PLUS charitable trust holds DowDuPont, is waiting for the final Form 10s to get a better understanding the three businesses. Form 10 is used to register securities with the Securities and Exchange Commision for trade on U.S. exchanges. 

"We are remaining patient as shares remain rangebound as investors await the final Form 10s, which will provide a view of what the standalone agriculture business (Corteva Agriscience) and Specialty Products (DuPont) businesses will look before the end of the year — recall, we received the Materials business Form 10 earlier this month," Cramer wrote in a note to subscribers. "Following the release of these documents, the next step will be the actual division of the company into the three new standalone entities."

DowDuPont is a holding in Jim Cramer's Action Alerts PLUS member club. Want to be alerted before Jim Cramer buys or sells DWDP? Learn more now.

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