Rising worries over the multi-decade high inflation and the possibility of a recession have heavily weighed on U.S. stocks lately. Last week, the Federal Reserve hiked its benchmark interest rate by 75 basis points to bring down the inflationary pressure, which further affected investor sentiment.
Bank of America Corp. (BAC) economists believe the U.S. economy has a 40% chance of sliding into recession next year. “Our worst fears around the Fed have been confirmed: They fell way behind the curve and are now playing a dangerous game of catch up. We look for GDP growth to slow to almost zero, inflation to settle at around 3%, and the Fed to hike rates above 4%,” the economists added.
Dow Jones Industrial Average fell close to 10% since the beginning of the month and 16% year-to-date. These macroeconomic headwinds are expected to push the index further lower.
Dow Jones constituents Dow Inc. (DOW), Intel Corporation (INTC), and Chevron Corporation (CVX) are the worst performers so far this month. Let’s evaluate these stocks.
Dow Inc. (DOW)
DOW provides materials science solutions for packaging, infrastructure, mobility, and consumer applications in the U.S., Canada, Europe, Africa, the Middle East, India, the Asia Pacific, and Latin America. The company operates through three segments: Packaging & Specialty Plastics; Industrial Intermediates & Infrastructure; and Performance Materials & Coatings.
On April 21, 2022, DOW announced plans to expand its global alkoxylation capacity in the U.S. and Europe to meet continued robust demand across a wide range of fast-growing end-markets, including home and personal care, industrial and institutional cleaning solutions, and pharmaceuticals.
The higher return and faster-payback projects that will increase DOW’s capacity are expected to come online in 2024 and 2025. It might take a while to realize gains for the company.
In the fiscal 2022 first quarter ended March 31, 2022, DOW’s research and development expenses increased 12.4% year-over-year to $218 million, while selling, general and administrative expenses grew 36.1% year-over-year to 498 million.
In addition, cash used for investing and financing activities amounted to $367 million and $1.02 billion, up 2,692% and 70.9% year-over-year, respectively.
The $1.71 consensus EPS estimate for the fiscal 2022 fourth quarter, ending December 2022, represents a 20.5% decline from the same period last year. Analysts expect DOW’s revenue for the same quarter to decrease marginally year-over-year to $14.28 billion.
Since May 31 closing, the stock has declined 19.5% to close the last trading session at $54.95.
Intel Corporation (INTC)
INTC develops, manufactures, and sells computer products and technologies worldwide. The company operates through seven segments: CCG; DCG; IOTG; Mobileye; NSG; PSG; and All Other. It offers platform products and high-performance compute solutions, workload-optimized platforms, and related products.
The company serves original equipment manufacturers, original design manufacturers, and cloud service providers.
On March 15, 2022, INTC announced an initial investment of more than 33 billion for semiconductor R&D and manufacturing in the European Union (EU), spanning France, Germany, Ireland, Italy, Poland, and Spain. The company plans for two new Intel processor factories in Magdeburg, Germany.
The construction of the 17-billion-euro project is expected to begin in the first half of 2023, with production coming online by the end of 2027. So, these projects might take a while to realize profits for the company.
INTC's net revenue decreased 6.7% year-over-year to $18.35 billion in the fiscal 2022 first quarter ended April 2, 2022. The company's gross margin declined 14.8% year-over-year to $9.24 billion. Also, net cash used for investing and financing activities came in at $2.64 billion and $1.86 billion, respectively.
Analysts expect INTC's revenue for the fiscal 2022 second quarter (ending June 2022) to come in at $17.98 billion, representing a 3% decline from the prior-year period. The street expects the company's EPS for the ongoing quarter to come at $0.52, representing a decline of 57.9% year-over-year.
The stock slumped 15.2% month-to-date and closed the last trading session at $37.73.
Chevron Corporation (CVX)
CVX engages in integrated energy and chemical operations worldwide. The company operates through two segments: Upstream; and Downstream. The Upstream segment is involved in the exploration, production, transportation, storage, and marketing of crude oil and natural gas. Its Downstream segment is engaged in refining crude oil into petroleum products and marketing crude oil, renewable fuels, and refined products.
In the fiscal 2022 first quarter ended March 31, 2022, CVX’s total cost and other deductions increased 51.8% year-over-year to $45.32 billion. Its other loss amounted to $26 million for the period. The company’s net cash for investing and financing activities stood at $700 million and $1.40 billion, respectively.
The consensus revenue estimate of $209.88 billion for the fiscal year 2023 ending December 2023 represents a decrease of 4.6% from the previous year. The $14.67 consensus EPS estimate for the next year indicates a 13.6% year-over-year decline.
Since the close of May 31, CVX’s shares have decreased 11.5% to close the last trading session at $154.59.
DOW shares were trading at $52.41 per share on Wednesday afternoon, down $2.54 (-4.62%). Year-to-date, DOW has declined -5.51%, versus a -20.09% rise in the benchmark S&P 500 index during the same period.
About the Author: Mangeet Kaur Bouns
Mangeet’s keen interest in the stock market led her to become an investment researcher and financial journalist. Using her fundamental approach to analyzing stocks, Mangeet’s looks to help retail investors understand the underlying factors before making investment decisions.
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