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Dow Inc. (DOW) is a diversified chemical manufacturing company. The company was formed as a result of the merger of Dow and DuPont in 2017 and subsequent spin in 2019. It provides a world-renown portfolio of advanced, sustainable, and leading-edge products.
The company is combining science and technology to develop innovative solutions that are essential to human progress. The firm offers a vast range of products and solutions across high-growth market segments such as packaging, infrastructure, and consumer care.
Its portfolio includes Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings. Its higher-value functional polymers, low-cost global feedstock positions, global footprint and market reach, and manufacturing sites in many geographic regions give it an advantage against its competitors.
This year, DOW has been well-positioned to benefit from crucial market trends, including consumer packaging and durables recovery. The company had a strong quarter, where it generated $13.9 billion in sales, up 66% year over year.
Sales rose due to higher local pricing in all its operating segments, businesses, and regions. This was driven by tight supply and demand fundamentals. The company should see even more demand and revenue growth as tight supply conditions support recent price increases.
Volumes rose 9% year over year, led by polyurethane and silicones applications, which saw a rebound in demand from the impacts of the pandemic. DOW also saw higher demand in infrastructure, industrial and personal care end markets.
Low inventories and robust demand in consumer packaging and construction end markets should keep polyethylene and polyurethane prices elevated. Plus, the demand for durable goods should continue to recover due to favorable macroeconomic trends.
The company has also been gaining from cost savings and productivity initiatives. It achieved $500 million in operating expense reductions last year and another $300 million in annualized EBITDA benefits from restructuring programs that started in the third quarter of last year.
These restructuring initiatives are expected to lower the company’s global workforce costs by nearly 6% and help support earnings this year. This should also lead to massive margin expansion. DOW has also taken action to reduce its debt.
Plus, management is focused on investing in attractive areas through highly accretive projects. For instance, the firm is investing in many high-return growth projects. This includes the expansion of downstream silicones capacity.
The company has an overall grade of A, translating into a Strong Buy rating in our POWR Ratings system. DOW has a Growth Grade of A, which makes sense as EBIDTA surged 324.7% over the past year. Analysts forecast earnings to rise 402% year over year in the current quarter.
The firm also has a Value Grade of B, which is no surprise with a trailing P/E of 11.37 and a forward P/E of 7.49. We also provide Momentum, Stability, Sentiment, and Quality grades for DOW, which you can find here.
DOW is ranked #9 in the A-rated Chemicals industry. For more top stocks in this top-ranked industry, make sure to visit this link.
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DOW shares were trading at $63.19 per share on Tuesday afternoon, up $1.13 (+1.82%). Year-to-date, DOW has gained 16.29%, versus a 20.55% rise in the benchmark S&P 500 index during the same period.
About the Author: David Cohne
David Cohne has 20 years of experience as an investment analyst and writer. He is the Chief Value Strategist for StockNews.com and the editor of POWR Value newsletter. Prior to StockNews, David spent eleven years as a consultant providing outsourced investment research and content to financial services companies, hedge funds, and online publications. David enjoys researching and writing about stocks and the markets. He takes a fundamental quantitative approach in evaluating stocks for readers.
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