Here's Why Dow (DOW) Stock is a Solid Choice Right Now
Dow Inc.’s DOW stock looks promising at the moment. The company’s shares have popped 23% over the past six months. It is benefiting from cost synergy savings and productivity initiatives, strengthening demand across a number of major markets and investment in high-return projects.
We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.
Dow currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of B. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
Let’s delve deeper into the factors that make Dow an attractive choice for investors right now.
An Outperformer
Shares of Dow have rallied 91.4% over a year against the 68.8% rise of its industry. It has also outperformed the S&P 500’s 41.2% rise over the same period.
Estimates Northbound
Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for Dow for the current year has increased 48.5%. The consensus estimate for second-quarter 2021 has also been revised 62.4% upward over the same time frame.
Positive Earnings Surprise History
Dow has outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an average earnings surprise of roughly 26.5%.
Solid Growth Prospects
The Zacks Consensus Estimate for earnings for the current year for Dow is currently pegged at $6.00, reflecting an expected year-over-year growth of 261.5%. Moreover, earnings are expected to register a whopping 880.8% growth in the second quarter of 2021.
Growth Drivers in Place
Dow should gain from cost synergy savings and productivity actions. The company focuses on maintaining cost and operational discipline. Dow achieved roughly $500 million in operating expense reductions in 2020. The company also expects to realize more than $300 million annualized EBITDA benefit from a restructuring program being initiated in the third quarter of 2020. Dow expects the restructuring program to be substantially complete by end-2021.
Dow is also seeing higher demand across a number of markets including construction, mobility, electronics and consumer durables amid the ongoing economic recovery. It is also benefiting from strong demand for its materials across healthcare and packaging markets, thanks to the coronavirus pandemic. The outbreak has led to a surge in demand for health, hygiene and safety products.
Dow, in its first-quarter call, said that it entered the second quarter with increased momentum and expects its businesses to benefit from the ongoing economic recovery, supported by the progress in vaccine distribution and tight market fundamentals. It also expects its capital investments to further support growth in its consumer-led portfolio.
The company remains focused on investing in attractive areas through highly accretive projects. It is investing in several high-return growth projects including the expansion of downstream silicones capacity. It is executing roughly 15 downstream silicones expansion projects this year. An ethylene cracker expansion in Canada is also underway. The South China Specialties Hub project will also allow Dow to capture higher value polyurethane systems and alkoxylates demand in Asia.
Moreover, Dow is committed to return value to its shareholders by leveraging healthy cash flows. It returned $521 million to shareholders in the first quarter of 2021 through dividends.
Dow Inc. Price and Consensus
Dow Inc. price-consensus-chart | Dow Inc. Quote
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation NUE, Celanese Corporation CE and Impala Platinum Holdings Limited IMPUY.
Nucor has a projected earnings growth rate of 228.4% for the current year. The company’s shares have rallied around 154% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Celanese has an expected earnings growth rate of around 68.3% for the current year. The company’s shares have shot up roughly 91% in the past year. It currently sports a Zacks Rank #1.
Impala Platinum has an expected earnings growth rate of 225.2% for the current fiscal. The company’s shares have surged around 154% in the past year. It currently carries a Zacks Rank #2.
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