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Dow (DOW) to Sell Off Rail Assets at Six North America Sites

Zacks Equity Research

Dow Inc. DOW inked a definitive deal to sell off its rail infrastructure assets and associated equipment at six major North American sites to Watco Companies, a Kansas-based transportation company.

Notably, the assets are situated at Dow’s sites in Freeport and Seadrift, TX; Plaquemine and St. Charles, LA, and Ft. Saskatchewan and Prentiss in Alberta, Canada.

Per the company’s management, the deal is part of review of Dow’s non-product producing assets and is in sync with an effort to grow its core businesses in a capital-efficient manner. Further, the transaction will liberate cash from balance sheet that will be used to pay down debt.

Dow anticipates significant rail expertise and capabilities of Watco to offer additional operational efficiencies and opportunities for growth over time.

Per the agreement, Dow anticipates to receive cash proceeds of more than $310 million from Watco as part of the deal. Notably, the deal is slated to close in the fourth quarter of 2020, subject to customary closing conditions.

Moreover, upon the completion of the transaction, 14 Dow employees and management of roughly 400 contract workers are anticipated to transition to Watco.

Goldman Sachs served as a financial advisor to Dow, and Mayer Brown & Thompson Hine offered legal support.

Dow’s shares have lost 12.6% in the past year compared with the 12.4% decline recorded by the industry.

 

 

The company, on its first-quarter earnings call, said that it is seeing indications of a recovery from the virus outbreak in China, while still assessing the impacts of the same in other major geographies. Factoring in a gradual and sustainable return of global economic activities, and the reopening of economies in May and June, it expects recovery as the year progresses.

Dow Inc. Price and Consensus

 

Dow Inc. Price and Consensus

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

Zacks Rank & Stocks to Consider

The company currently carries a Zacks Rank #3 (Hold).

Some better-ranked stocks in the basic materials space are AngloGold Ashanti Limited AU, Sandstorm Gold Ltd SAND and Harmony Gold Mining Company Limited HMY.

AngloGold has a projected earnings growth rate of 109.9% for the current year. The company’s shares have surged around 62% in a year. It currently has a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Sandstorm Gold has a projected earnings growth rate of 55.6% for the current year. The stock has gained around 77% in a year. It currently has a Zacks Rank of 2.

Harmony Gold has an expected earnings growth rate of 264.3% for 2020. The company’s shares have gained 99.1% in the past year. It is presently a Zacks #2 Ranked player.

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