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Here's What Makes Dow (DOW) Stock a Solid Bet Right Now
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Dow Inc.’s (DOW - Free Report) stock looks promising at the moment. It is benefiting from cost synergy savings and productivity initiatives, strong 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 A. 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.
Estimates Going Up
Over the past two months, the Zacks Consensus Estimate for Dow for the current year has increased 4%. The consensus estimate for first-quarter 2022 has also been revised 3.7% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.
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 11.1%.
Valuation Looks Attractive
Dow’s shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.
Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Dow is currently trading at trailing 12-month EV/EBITDA multiple of 5.29, cheaper compared with the industry average of 7.18.
Growth Drivers in Place
Dow is seeing higher demand across a number of markets including personal care, electronics and construction 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 pandemic has led to a surge in demand for health, hygiene and safety products.
Dow, in its fourth-quarter call, said that it expects demand strength across its end markets to continue in 2022, aided by rising industrial production and sustained consumer spending. Dow also expects logistics issues to ease throughout this year to fulfill elevated order backlogs and pent-up customer demand.
The company should also gain from cost synergy savings and productivity actions. It focuses on maintaining cost and operational discipline. Dow is expected to realize a full $300 million EBITDA run rate benefit from its restructuring programs in 2022.
Dow also 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. The company completed its Fort Saskatchewan expansion in 2021, which is expected to support higher polyethylene demand. Its fluidized catalytic dehydrogenation pilot plant in Louisiana is also expected to start up in 2022 to manufacture propylene for coatings, electronics and durables markets.
The company is also committed to return value to its shareholders by leveraging healthy cash flows. It generated strong cash flow from operating activities of $7.1 billion and returned $3 billion to shareholders in 2021 through dividends and share repurchases.
Other top-ranked stocks worth considering in the basic materials space include Nutrien Ltd. (NTR - Free Report) , AdvanSix Inc. (ASIX - Free Report) and Commercial Metals Company (CMC - Free Report) .
Nutrien, sporting a Zacks Rank #1, has an expected earnings growth rate of 106.4% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 37.8% upward over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 60.3%, on average. NTR has rallied around 88% in a year.
AdvanSix, carrying a Zacks Rank #1, has an expected earnings growth rate of 64.9% for the current year. ASIX's consensus estimate for current-year earnings has been revised 53% upward in the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 46.9%. ASIX has rallied around 84% in a year.
Commercial Metals, carrying a Zacks Rank #1, has a projected earnings growth rate of 114.7% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised 35.1% upward over the past 60 days.
Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 13.7%, on average. CMC has gained around 32% in a year.
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Here's What Makes Dow (DOW) Stock a Solid Bet Right Now
Dow Inc.’s (DOW - Free Report) stock looks promising at the moment. It is benefiting from cost synergy savings and productivity initiatives, strong 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 A. 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.
Estimates Going Up
Over the past two months, the Zacks Consensus Estimate for Dow for the current year has increased 4%. The consensus estimate for first-quarter 2022 has also been revised 3.7% upward over the same time frame. The favorable estimate revisions instill investor confidence in the stock.
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 11.1%.
Valuation Looks Attractive
Dow’s shares are currently trading at a level that is lower than the industry average, suggesting that the stock still has upside potential.
Going by the EV/EBITDA (Enterprise Value/ Earnings before Interest, Tax, Depreciation and Amortization) multiple, which is often used to value chemical stocks, Dow is currently trading at trailing 12-month EV/EBITDA multiple of 5.29, cheaper compared with the industry average of 7.18.
Growth Drivers in Place
Dow is seeing higher demand across a number of markets including personal care, electronics and construction 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 pandemic has led to a surge in demand for health, hygiene and safety products.
Dow, in its fourth-quarter call, said that it expects demand strength across its end markets to continue in 2022, aided by rising industrial production and sustained consumer spending. Dow also expects logistics issues to ease throughout this year to fulfill elevated order backlogs and pent-up customer demand.
The company should also gain from cost synergy savings and productivity actions. It focuses on maintaining cost and operational discipline. Dow is expected to realize a full $300 million EBITDA run rate benefit from its restructuring programs in 2022.
Dow also 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. The company completed its Fort Saskatchewan expansion in 2021, which is expected to support higher polyethylene demand. Its fluidized catalytic dehydrogenation pilot plant in Louisiana is also expected to start up in 2022 to manufacture propylene for coatings, electronics and durables markets.
The company is also committed to return value to its shareholders by leveraging healthy cash flows. It generated strong cash flow from operating activities of $7.1 billion and returned $3 billion to shareholders in 2021 through dividends and share repurchases.
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 Nutrien Ltd. (NTR - Free Report) , AdvanSix Inc. (ASIX - Free Report) and Commercial Metals Company (CMC - Free Report) .
Nutrien, sporting a Zacks Rank #1, has an expected earnings growth rate of 106.4% for the current year. The Zacks Consensus Estimate for NTR's current-year earnings has been revised 37.8% upward over the last 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missing once. It has a trailing four-quarter earnings surprise of roughly 60.3%, on average. NTR has rallied around 88% in a year.
AdvanSix, carrying a Zacks Rank #1, has an expected earnings growth rate of 64.9% for the current year. ASIX's consensus estimate for current-year earnings has been revised 53% upward in the past 60 days.
AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 46.9%. ASIX has rallied around 84% in a year.
Commercial Metals, carrying a Zacks Rank #1, has a projected earnings growth rate of 114.7% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised 35.1% upward over the past 60 days.
Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 13.7%, on average. CMC has gained around 32% in a year.