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Dow (DOW) Q3 Earnings & Sales Trounce Estimates on Price Surge

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Dow Inc. DOW swung to a profit (on a reported basis) of $1,683 million or $2.23 per share in third-quarter 2021, from a loss of $25 million or 4 cents per share a year ago.

Barring one-time items, adjusted earnings were $2.75 per share for the reported quarter, topping the Zacks Consensus Estimate of $2.60.

Dow logged net sales of $14,837 million for the quarter, up roughly 53% year over year. It also surpassed the Zacks Consensus Estimate of $14,372.9 million. Sales rose on the back of higher local pricing in all operating segments, businesses and regions, supported by tight supply and demand fundamentals. Dow saw a 50% year-over-year increase in local prices in the reported quarter. Prices also rose 5% on a sequential comparison basis.

Volumes rose 2% year over year on gains across Packaging & Specialty Plastics and Performance Materials & Coatings units. Volumes also increased 2% sequentially on sustained end-market demand strength, partly masked by supply and global logistics constraints.

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 69% year over year to $7.7 billion in the reported quarter on higher volumes and prices, and favorable currency impact. Volumes went up 5% on gains in olefins and energy while local prices jumped 63%. Currency increased sales by 1%.

Industrial Intermediates & Infrastructure: Sales for the unit went up 47% year over year to $4.5 billion. Local prices jumped 49% on tight supply and demand fundamentals. Volumes fell 4%, hurt by transition of a low-margin coproducer contract, weather-related outages and supply disruptions. Currency increased sales by 2%.

Performance Materials & Coatings: Revenues from the division went up 26% year over year to $2.5 billion. Volumes increased 2% while local price rose 23%. Currency increased sales by 1%. Volumes rose as higher demand for mobility, electronics, personal care and industrial applications more than offset supply constraints for acrylic monomers and architectural coatings.

Financials

Dow had cash and cash equivalents of $2,911 million at the end of the quarter, down around 36% year over year. Long-term debt was $14,027 million, down around 16% year over year.

Cash provided by operating activities from continuing operations was $2.7 billion in the reported quarter while free cash flow was $2.3 billion.

Dow also returned $918 million to shareholders in the third quarter through dividends and share buybacks.

Outlook

Moving ahead, the company said that it is seeing strong end-market demand and expects this to continue into 2022. It also expects logistics constraints and low inventory levels across its value chains over the near term. It will remain focused on building on its competitive advantage with growth from higher-margin, sustainability-driven, downstream solutions and value-accretive investments. The company also said that it is well-placed to increase earnings, cash flow and returns as it decarbonizes its footprint and achieves its 2030 and 2050 carbon emissions reduction goals.

Price Performance

Dow’s shares have gained 22.6% over a year compared with a 23% rise recorded by the industry.

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Zacks Investment Research

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Zacks Rank & Other Key Picks

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

Better-ranked stocks worth considering in the basic materials space include Nutrien Ltd. NTR, Methanex Corporation MEOH and Steel Dynamics, Inc. STLD, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Nutrien has an expected earnings growth rate of 181.7% for the current year. The stock has also rallied around 72% over a year.

Methanex has a projected earnings growth rate of 425.3% for the current year. The company’s shares have shot up around 65% in a year.

Steel Dynamics has a projected earnings growth rate of 454.9% for the current year. The company’s shares have surged around 102% in a year.


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