We are reaffirming our Neutral recommendation on
) following its mixed first-quarter 2013 results. Its adjusted
earnings for the quarter outperformed the Zacks Consensus
Estimate while revenues miss.
The U.S. chemical kingpin's profit soared 33% in the first
quarter on strength in its agriculture business, buoyed by
healthy demand from farmers. The company registered record sales
of seeds and crop protection products. However, sales fell 2% in
the quarter as gains across agricultural sciences and electronic
and functional materials were masked by declines in other
Dow, which currently retains a short-term Zacks Rank #3 (Hold),
is benefiting from strong fundamentals in agriculture and food
markets. A string of innovative products in its pipeline adds to
Moreover, Dow is seeing significant feedstock advantage in North
America. The company's investments in the U.S. Gulf Coast and
Middle East are focused on boosting this advantage.
In addition, Dow remains focused on offering incremental returns
to its shareholders leveraging its healthy cash flows. It also
continues debt repayments having reduced its debt by over $900
million in the first quarter.
However, Dow continues to witness softness in the electronics and
construction end-markets. Moreover, Dow is facing challenges in
Western Europe due to the beleaguered economic conditions. It
does not see a material improvement in the macroeconomic
environment this year.
Moreover, Dow is exposed to significant pension headwinds. The
company expects pension costs to increase between $250 million
and $300 million in 2013.
Other Stocks to Consider
Other companies in the chemical industry that are worth
Shin-Etsu Chemical Co., Ltd.
). While Shin-Etsu Chemical retains a Zacks Rank #1 (Strong Buy),
both Celanese and Methanex hold a Zacks Rank #2 (Buy).
CELANESE CP-A (CE): Free Stock Analysis
DOW CHEMICAL (DOW): Free Stock Analysis
METHANEX CORP (MEOH): Free Stock Analysis
SHIN-ETSU CHEM (SHECY): Get Free Report
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