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Dow (DOW) Tops Q4 Earnings, Sales on Higher Volumes and Prices

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·4 min read
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Dow Inc. DOW logged earnings (on a reported basis) of $1.65 per share for fourth-quarter 2020 against a loss of $3.14 per share a year ago.

Barring one-time items, adjusted earnings were 81 cents per share for the reported quarter, topping the Zacks Consensus Estimate of 69 cents.

Dow raked in net sales of $10,706 million for the quarter, up roughly 5% year over year. It also surpassed the Zacks Consensus Estimate of $9,896.7 million. Sales rose due to higher local pricing and volumes. Dow saw a 2% year-over-year increase in local prices in the reported quarter. Prices also rose 8% on a sequential comparison basis on gains across all segments.

Volumes edged up 1% year over year in the quarter, driven by higher demand in Packaging & Specialty Plastics and Performance Materials & Coatings segments. The company saw higher volumes in every region and segment on a year-over-year basis driven by its consumer-led portfolio and focus on capturing demand.

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 went up 6% year over year to $5.1 billion in the reported quarter on higher volumes and prices, and favorable currency impact. Volumes rose 2% on olefin end-market demand while local prices went up 2%. Currency increased sales by 2%.

Industrial Intermediates & Infrastructure: Sales for the unit increased 8% year over year to $3.5 billion. Volumes were steady as growth from strong construction and durable goods demand was offset by pressure from supply limitations. Local prices rose 6% on the back of significant increases in consumer goods and appliances. Currency increased sales by 2%.

Performance Materials & Coatings: Revenues from the division were flat year over year at $2 billion. Volumes rose 2% while local price declined 3%. Currency increased sales by 1%. Volumes were driven by growth in do-it-yourself architectural coatings and home care.

FY20 Results

Earnings (as reported) for full-year 2020 were $1.64 per share, compared with a loss of $1.84 per share a year ago. Net sales dropped around 10% year over year to $38,542 million.

Financials

Dow had cash and cash equivalents of $5,104 million at the end of 2020. Long-term debt was $16,491 million.

Cash provided by operating activities from continuing operations was $1.7 billion in the reported quarter while free cash flow was $1.4 billion. Free cash flow for full-year 2020 was $5 billion.

Dow also returned $519 million to shareholders in the fourth quarter through dividends. It also achieved a total net debt improvement in excess of $2.6 billion in 2020.

Outlook

Moving ahead, Dow noted that it entered the new year with momentum on a sequential comparison basis and is well-placed for sustained profitable growth amid the ongoing economic recovery. The company expects rising margins as differentiated parts of its portfolio witness improving demand on market recovery. Dow also expects to deliver significant value through innovation and operational efficiencies. Moreover, the company is benefiting from improving cost structure, financial flexibility and its low-cost operating model.

Price Performance

Dow’s shares are up 9.4% over a year, compared with a 22.1% rise recorded by the industry.

Zacks Rank & Key Picks

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

Better-ranked stocks worth considering in the basic materials space include Fortescue Metals Group Limited FSUGY, Impala Platinum Holdings Limited IMPUY and BHP Group BHP.

Fortescue has a projected earnings growth rate of 75.5% for the current fiscal. The company’s shares have surged around 129% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Impala Platinum has an expected earnings growth rate of 189.4% for the current fiscal. The company’s shares have rallied around 42% in the past year. It currently carries a Zacks Rank #1.

BHP Group has a projected earnings growth rate of 59.5% for the current fiscal year. The company’s shares have gained around 30% in a year. It currently carries a Zacks Rank #1.

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