Sell shares of chemical producer Dow as a petrochemicals recession looms ahead, according to KeyBanc Capital Markets. Analyst Aleksey Yefremov downgraded shares of Dow to underweight from sector weight, citing challenges ahead for the company including potential power shortages in Europe later this year. “We see short-term risk/reward for names with meaningful commodity and European exposure skewed to the downside. We expect 4Q22 margins and earnings to approach ‘trough’ or “recession” levels, while we move to sub-normalized 2023 estimates,” Yefremov wrote in a Sunday note. “As a result, we move [DOW] from Sector Weight to Underweight.” Dow has outperformed the major averages this year, down just 4% compared to the S & P 500’s near 15% decline, but the analyst sees weakening demand and logistical challenges for polyethylene and other chemicals involved in plastics production. The analyst cited a S & P Global report last week that said the company is cutting global polyethylene production rates by 15%. “The current CMA forecast calls for a $0.04/lb decline in U.S. PE prices in August. This week CMA revised its forecast for September to a $0.04/lb decline, compared to flat previously. We see downside risks to this estimate and see a decline more likely in the $0.05-$0.08/lb range,” the note read. To be sure, a rise in crude oil prices, or a rebound in China demand, would boost the company. Still, the analyst has a $45 price target on Dow, representing 17% downside from where shares closed Friday at $54.46. Shares dipped 2.4% in Monday premarket trading. —CNBC’s Michael Bloom contributed to this report.