Dow's (DOW) Earnings and Revenues Top Estimates in Q3
Dow Inc. DOW recorded earnings (on a reported basis) of 42 cents per share in third-quarter 2023, down from $1.02 per share a year ago.
Barring one-time items, adjusted earnings were 48 cents per share for the reported quarter, down from $1.11 a year ago. The figure topped the Zacks Consensus Estimate of 43 cents.
Dow recorded net sales of $10,730 million for the quarter, down roughly 24% year over year. It also surpassed the Zacks Consensus Estimate of $10,677.1 million. The company saw lower sales across its segments in the quarter, hurt by weaker macroeconomic activities. The top line was affected by lower local pricing and reduced volumes.
The company saw an 18% year-over-year decline in local prices in the reported quarter on declines in all segments and regions. Prices also fell 7% on a sequential comparison basis. Volumes were down 6% year over year driven by lower merchant hydrocarbons and energy volumes.
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 fell 26% year over year to $5,454 million in the reported quarter. The figure was ahead of our estimate of $5,425.6 million. Volumes were down 7% year over year while local prices fell 20% due to reduced polyethylene and olefin prices.
Industrial Intermediates & Infrastructure: Sales for the unit tumbled 25% year over year to $3,035 million. The figure surpassed our estimate of $2,900.2 million. Local prices fell 17% in the quarter. Volumes declined 7% on lower global demand.
Performance Materials & Coatings: Revenues from the division declined 20% year over year to $2,130 million. The figure was ahead of our estimate of $2,010.4 million. Volumes fell 3% while local price went down 17%. Volumes were impacted by weaker demand for personal care and coatings applications in residential construction, which more than offset gains in commercial building and construction end markets.
Financials
Dow had cash and cash equivalents of $3,080 million at the end of the quarter, up around 39% year over year. Long-term debt was $14,592 million, up around 13% year over year.
Cash provided by operating activities from continuing operations was $1.7 billion in the reported quarter.
Dow also returned $617 million to shareholders in the quarter through dividends and share buybacks.
Outlook
Moving ahead, Dow said that it remains focused on operational and financial discipline as it navigates challenging market conditions. It expects to benefit from rising oil prices that favor its cost-advantaged asset footprint.
The company continues to implement targeted actions to deliver $1 billion in cost savings this year. It also remains committed to its disciplined and balanced capital allocation priorities. DOW expects its Decarbonize and Grow and Transform the Waste strategies to generate more than $3 billion in underlying earnings, lower greenhouse gas emissions by 5 million metric tons and commercialize 3 million metric tons of circular and renewable solutions annually by 2030.
Price Performance
Shares of Dow are up 0.8% over a year compared with the industry’s 4.6% decline.
Image Source: Zacks Investment Research
Zacks Rank & Key Picks
Dow currently has a Zacks Rank #3 (Hold).
Better-ranked stocks worth a look in the basic materials space include Koppers Holdings Inc. KOP, WestRock Company WRK and The Andersons Inc. ANDE.
Koppers has a projected earnings growth rate of 7.5% for the current year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Koppers has a trailing four-quarter earnings surprise of roughly 21.7%, on average. KOP shares have surged around 48% in a year.
WestRock currently carries a Zacks Rank #2. In the past 60 days, the Zacks Consensus Estimate for the current fiscal year has been revised upward by 5.2%.
WRK beat the Zacks Consensus Estimate in three of the last four quarters while missing once, with the average earnings surprise being 30.7%. The company’s shares have gained 2% in the past year.
Andersons currently carries a Zacks Rank #2. The Zacks Consensus Estimate for ANDE's current-year earnings has been revised 3.3% upward over the past 60 days.
Andersons beat the Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 64.4%, on average. ANDE shares have rallied around 37% in a year.
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