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Dow's (DOW) Q2 Earnings Surpass Estimates, Revenues Trail

Zacks Equity Research

Dow Inc. DOW logged earnings (on a reported basis) from continuing operations of 10 cents per share for second-quarter 2019, down from $1.05 per share a year ago.

Barring one-time items, earnings were 86 cents per share for the second quarter, squeaking past the Zacks Consensus Estimate of 85 cents.

Dow raked in net sales of $11,014 million, down 14% from the adjusted sales a year ago. It missed the Zacks Consensus Estimate of $11,300.9 million. Sales fell mainly due to lower local pricing in polyethylene, siloxanes and isocyanates and reduced hydrocarbon co-products sales. Currency reduced sales by 2% in the quarter.

Volumes fell 3% in the quarter, affected by lower hydrocarbon co-product sales and higher ethane feedstock usage. The company also saw a 9% decline in local prices.

Segment Highlights

Performance Materials & Coatings: Revenues from the division went down 12% from the adjusted sales a year ago to $2.4 billion in the quarter. Sales were impacted by volumes and local price decline of 5% each. Currency also reduced sales by 2%.

Industrial Intermediates & Infrastructure: Sales for the unit fell 16% to $3.3 billion. Volumes fell 1% while local prices declined 12%. Currency lowered sales by 3%.

Packaging & Specialty Plastics: The division’s sales fell 15% to $5.2 billion. Volumes fell 4% while local prices slipped 9%. Currency also reduced sales by 2%.


Dow had cash and cash equivalents of $2,446 million at the end of the quarter. Long-term debt was $17,155 million.

Cash provided by operating activities from continuing operations was $960 million in the quarter, up 26% year over year.

Dow returned $0.8 billion to shareholders in the quarter through dividend and share repurchase.


Dow said that the pace of global economic growth has slowed as buying patterns remain cautious amid trade and geopolitical uncertainties. In this backdrop, the company remains focused on maintaining cost and operational discipline through cost synergy and stranded cost removal initiatives. The company noted that it is lowering its planned capital spending for 2019 to $2 billion from $2.5 billion in response to the prevailing market environment.  

Dow delivered cost synergy savings of more than $130 million and $45 million of stranded cost removal during the second quarter.

Price Performance

Dow’s shares are down around 4.5% over the past three months, compared with the roughly 11.5% decline 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 Israel Chemicals Ltd. ICL, Flexible Solutions International Inc FSI and Air Products and Chemicals, Inc. APD.

Israel Chemicals has an expected earnings growth rate of 13.5% for the current year and carries a Zacks Rank #1 (Strong Buy). Its shares are up roughly 8% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flexible Solutions has an expected earnings growth rate of 342.9% for the current fiscal year and carries a Zacks Rank #2 (Buy). Its shares have surged around 151% in the past year.

Air Products has an expected earnings growth rate of 10.3% for the current fiscal year and carries a Zacks Rank #2. The company’s shares have gained around 39% over the past year.  

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