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Dow (DOW) Q2 Earnings Trounce Estimates on Higher Local Prices

·4 min read

Dow Inc. DOW recorded a profit (on a reported basis) of $1,661 million or $2.26 per share in second-quarter 2022, down from a profit of $1,901 million or $2.51 per share a year ago.

Barring one-time items, adjusted earnings were $2.31 per share for the reported quarter, topping the Zacks Consensus Estimate of $2.14.
 
Dow recorded net sales of $15,664 million for the quarter, up roughly 13% year over year. It beat the Zacks Consensus Estimate of $15,449.2 million. Sales rose on the back of higher local pricing in all operating segments, businesses and regions.

The company witnessed a 16% year-over-year increase in local prices in the reported quarter. Prices also rose 6% on a sequential comparison basis. Volumes were flat year over year as gains in Packaging & Specialty Plastics were offset by lower volumes in Industrial Intermediates & Infrastructure.

Dow benefited from higher prices, strong demand in Packaging & Specialty Plastics and disciplined execution in the reported quarter that more than offset raw material and energy cost inflation, pandemic-induced lockdowns in China and logistics challenges.

 

Dow Inc. Price, Consensus and EPS Surprise

 

Dow Inc. Price, Consensus and EPS Surprise
Dow Inc. Price, Consensus and EPS Surprise

Dow Inc. price-consensus-eps-surprise-chart | Dow Inc. Quote

 

Segment Highlights

Packaging & Specialty Plastics: The division’s sales climbed 16% year over year to $8.2 billion in the reported quarter on higher volumes and local prices. Volumes rose 5% on gains in energy, infrastructure and packaging applications. Local prices rose 14%. Currency reduced sales by 3%.

Industrial Intermediates & Infrastructure: Sales for the unit went up 4% year over year to $4.4 billion. Local prices rose 14% with gains in all businesses. Volumes fell 6% as declines in Polyurethanes & Construction Chemicals were partly masked by higher volumes in Industrial Solutions.

Performance Materials & Coatings: Revenues from the division rose 22% year over year to $3 billion. Volumes fell 3% while local price jumped 28%. Volumes fell due the impacts of lockdowns in China, partly offset by higher demand for silicones and coatings applications in the United States and Canada.

Financials

Dow had cash and cash equivalents of $2,367 million at the end of the quarter, down around 43% year over year. Long-term debt was $13,065 million, down around 19% year over year.

Cash provided by operating activities from continuing operations was $1.9 billion in the reported quarter while free cash flow was $1.4 billion.

Dow also returned $1.3 billion to shareholders in the quarter through dividends and share buybacks.

Outlook

Moving ahead, the company said that long-term fundamentals driving growth across its end markets continue to be attractive. It continues to leverage its diverse portfolio and flexible operating model to capitalize on attractive growth opportunities. Its disciplined and balanced capital allocation has also delivered higher mid-cycle earnings, improved credit profile and cash generation above pre-pandemic levels, Dow noted.

Price Performance

Dow’s shares have lost 13.1% over a year compared with a 11.6% decline recorded by the industry.

 

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Image Source: Zacks Investment Research

 

Zacks Rank & Other Key Picks

Dow currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Cabot Corporation CBT, ATI Inc. ATI and Albemarle Corporation ALB.

Cabot, currently carrying a Zacks Rank #1 (Strong Buy), has an expected earnings growth rate of 22.5% for the current fiscal year. The Zacks Consensus Estimate for CBT's earnings for the current fiscal has been revised 0.8% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cabot’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 16.2%. CBT has gained around 32% over a year.

ATI, currently sporting a Zacks Rank #1, has a projected earnings growth rate of 1,069.2% for the current year. The Zacks Consensus Estimate for ATI's current-year earnings has been revised 17.8% upward in the past 60 days.

ATI’s earnings beat the Zacks Consensus Estimate in the last four quarters. It has a trailing four-quarter earnings surprise of roughly 128.9%, on average. ATI shares are up around 22% in a year.

Albemarle has a projected earnings growth rate of 239.1% for the current year. The Zacks Consensus Estimate for ALB’s current-year earnings has been revised 20.5% upward in the past 60 days.

Albemarle’s earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, the average being 20%. ALB has gained roughly 14% in a year. The company flaunts a Zacks Rank #2 (Buy).


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