Key Takeaways
- DOW inventory is buying and selling at a roughly 32% low cost to its 52-week excessive of $60.69, reached on April 4, 2024.
- Technical indicators present DOW inventory buying and selling under the 200-day easy shifting common (SMA) since Oct. 7.
- DOW faces challenges from demand softness overseas, with decrease shopper spending and inflationary pressures.
Dow Inc.’s DOW inventory seems enticing from a valuation standpoint. DOW is at the moment buying and selling at a ahead worth/earnings of 15.18X, a roughly 6.8% low cost when stacked up with the Zacks Chemicals Diversified business’s common of 16.29X.
DOW inventory is buying and selling at a roughly 32% low cost to its 52-week excessive of $60.69, reached on April 4, 2024.
Picture Supply: Zacks Funding Analysis
Technical indicators present that DOW has been buying and selling under the 200-day easy shifting common (SMA) since Oct. 7, 2024. The inventory can be buying and selling under the 50-day SMA since Oct. 21, 2024. Following a demise crossover on July 29, 2024, the 50-day SMA continues to learn decrease than the 200-day SMA, indicating a bearish development.
Dow’s Shares Commerce Under 50-Day SMA
Picture Supply: Zacks Funding Analysis
Dow’s low-cost valuation ought to lure traders searching for worth. However is the time proper to purchase DOW’s shares primarily based on its enticing valuation? Let’s delve deeper.
DOW Inventory Underperforms Trade & S&P 500
DOW’s worth efficiency has been lackluster, reflecting headwinds from gentle end-market demand amid an unfavorable macroeconomic surroundings and pricing strain. Its shares have tumbled 23.4% over the previous yr, underperforming the business’s 3.7% decline and the S&P 500’s improve of 24.7%. Its friends, LyondellBasell Industries N.V. LYB and BASF SE BASFY, have misplaced 17.6% and a couple of.6%, respectively, whereas Eastman Chemical Firm EMN has gained 6.7%, over the identical interval.
DOW’s One-year Value Efficiency
Picture Supply: Zacks Funding Analysis
Demand Weak point, Pricing Headwinds Weigh on DOW Inventory
DOW faces challenges from demand softness in Europe and China. Decrease shopper spending amid inflationary pressures is affecting demand in Europe. Development and manufacturing actions stay gentle within the area. Demand in Asia has been affected by weaker demand restoration in China. The property sector stays sluggish in China with declining new house costs.
Demand in infrastructure together with residential building, stays weak. Inflationary pressures are hurting shopper durables and constructing and building demand. Demand in infrastructure together with residential building additionally stays weak. Dow additionally sees softness in automotive in Europe and China resulting from low demand. Delicate situations throughout these markets are more likely to weigh on volumes within the close to time period. Demand is predicted to stay pressured by elevated inflation, low shopper confidence throughout Europe and China, and geopolitical tensions, significantly in constructing and building and sturdy items markets.
Dow can be being challenged by weaker costs in its Efficiency Supplies & Coatings unit, which is weighing on the phase’s margins. The unit faces challenges from weaker siloxane costs partly resulting from provide additions in Asia. Siloxane costs stay beneath strain resulting from aggressive pricing strain ensuing from extra provide. Whereas capability additions have slowed of late, elevated business provide is predicted to proceed to impression costs over the close to time period.
Excessive-Return Progress Tasks & Value Actions Assist Dow
DOW advantages from its differentiated portfolio and low-cost feedstock positions. It stays targeted on investing in enticing areas by way of extremely accretive tasks. Disciplined and balanced capital allocation priorities additionally assist its Decarbonize and Develop technique to ship long-term worth creation for its shareholders. DOW is advancing its Decarbonize and Develop, and Rework the Waste methods, that are anticipated to ship greater than $3 billion in underlying earnings yearly by 2030.
The corporate obtained a definitive inexperienced mild from its board in November 2023 for its Fort Saskatchewan Path2Zero initiative, marking a big milestone in its dedication to constructing the world’s inaugural net-zero Scope 1 and a couple of emissions-integrated ethylene cracker and derivatives facility in Alberta, Canada.
The challenge entails the development of a brand new ethylene cracker, a 2-million MTA polyethylene capability growth and retrofitting the present cracker to attain net-zero Scope 1 and a couple of emissions. It’s anticipated to generate $1 billion in EBITDA progress yearly all through the financial cycle and decarbonize 20% of Dow’s international ethylene capability. The funding positions DOW to satisfy rising demand in profitable markets akin to packaging, infrastructure and hygiene, with extra potential positive factors from the commercialization of low and zero-emission merchandise. Dow has inked a long-term settlement with Linde for the availability of fresh hydrogen on the Path2Zero challenge.
Dow additionally focuses on sustaining value and operational self-discipline. The corporate is implementing focused actions to optimize labor and bought service prices, decrease turnaround spending, and enhance productiveness.
DOW’s Sound Monetary Well being Helps Capital Allocation
DOW has a powerful stability sheet and generates substantial money flows, which permit it to finance its progress investments targeted on higher-value companies and areas and drive shareholder worth. It generated money from working actions from persevering with operations of $800 million within the third quarter of 2024. It ended the quarter with stable liquidity of round $13 billion, together with money and money equivalents of roughly $3 billion. Dow returned roughly $1.97 billion to its shareholders within the first 9 months of 2024 by way of dividends and share buybacks, together with $584 million within the third quarter. It purchased again shares value $494 million within the first 9 months of 2024 and had roughly $931 million accessible beneath its share buyback program on the finish of the third quarter.
Dow just lately reached a definitive deal to promote a 40% fairness curiosity in choose U.S. Gulf Coast infrastructure belongings to a fund managed by Macquarie Asset Administration. DOW anticipates getting about $2.4 billion in preliminary money proceeds from the sale of its 40% minority fairness curiosity, with the potential to generate money proceeds of as much as roughly $3 billion for a 49% minority stake. Macquarie Asset Administration can have the choice to extend its possession stake to 49% inside six months of the transaction’s closure. The deal will increase monetary flexibility and permits for steady money deployment into probably the most enticing initiatives that can generate long-term worth for its shareholders.
DOW provides a wholesome dividend yield of 6.8% on the present inventory worth. Whereas DOW has a excessive payout ratio of 131%, its dividend is perceived to be protected and dependable, backed by sturdy money flows and sound monetary well being.
Dow’s Earnings Estimates Southbound
The Zacks Consensus Estimate for DOW’s 2024 earnings has been happening over the previous 60 days. The consensus estimate for fourth-quarter 2024 earnings has additionally been revised downward over the identical timeframe.
Discover the most recent earnings estimates and surprises on Zacks Earnings Calendar.
Picture Supply: Zacks Funding Analysis
How Ought to Buyers Play the DOW Inventory?
Whereas DOW advantages from its value and productiveness actions and funding in high-return tasks, it’s uncovered to weak demand in a difficult surroundings and pricing headwinds, which have led to its underperformance. This, coupled with declining earnings estimates, solid a pall on the corporate’s prospects. Whereas DOW is at the moment buying and selling cheaper than its business, it isn’t advisable to purchase this Zacks Rank #5 (Sturdy Promote) inventory till market situations enhance.
You’ll be able to see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
5 Shares Set to Double
Every was handpicked by a Zacks knowledgeable because the #1 favourite inventory to achieve +100% or extra in 2024. Whereas not all picks could be winners, earlier suggestions have soared +143.0%, +175.9%, +498.3% and +673.0%.
Many of the shares on this report are flying beneath Wall Avenue radar, which gives an amazing alternative to get in on the bottom flooring.
Today, See These 5 Potential Home Runs >>
Dow Inc. (DOW) : Free Stock Analysis Report
BASF SE (BASFY) : Free Stock Analysis Report
Eastman Chemical Company (EMN) : Free Stock Analysis Report
LyondellBasell Industries N.V. (LYB) : Free Stock Analysis Report
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The views and opinions expressed herein are the views and opinions of the creator and don’t essentially mirror these of Nasdaq, Inc.
