The Dow Chemical Company
) is scheduled to report its second-quarter 2012 results before
trading begins on Thursday, July 26. Analysts polled by Zacks
currently expect revenues of $15,961 million and earnings of 64
cents a share on average for the quarter. The Zacks Consensus
Estimate for earnings represents an estimated year-over-year
decline of 24.6%.
While Dow did not reveal any specific financial guidance, it
believes economic recovery will gain momentum in the June quarter
and the remainder of the year. The Michigan-based company expects
to meet its short- and long-term targets irrespective of economic
conditions. Moreover, Dow sees an improving U.S. economy citing
tailwind from the nation's rich access to low-cost natural gas.
With respect to earnings surprises, the company has beaten the
Zacks Consensus Estimate in two of the trailing four quarters while
missing on two other occasions. Dow has delivered an average
negative earnings surprise of 3.84% over the past four quarters.
First Quarter Flashback
Dow started the year with mixed results in the first quarter,
beating the Zacks Consensus Estimate on earnings while falling
behind on the revenue front. The company recorded adjusted
(excluding one-time charges) earnings of 61 cents a share in the
quarter, which beat the Zacks Consensus Estimate by two cents while
falling below the year-ago adjusted earnings of 82
Profit (as reported) slipped 34% year over year to $412 million (or
35 cents a share), bogged down by restructuring charges of roughly
$357 million associated with plant closures and downsizing.
Revenues dipped narrowly year over year to $14,719 million, missing
the Zacks Consensus Estimate of $15,342 billion. Healthy growth
across agricultural and feedstock/energy businesses were
neutralized by declines in performance materials and performance
Volumes declined 1% year over year, but were up 3% barring the
impact of divestitures. On an adjusted basis, the company saw gains
across Europe, the Middle East and Africa (EMEA) and North America
and declines in Latin America and Asia Pacific.
Estimate Revisions Trends
Estimates for the second quarter demonstrate lack of activity over
the past week with no movement in either direction. However, there
has been a downswing over the last 30 days with 6 analysts (out of
12) having trimmed their forecasts with just 1 raising the same.
Estimate for 2012 elicit a comprehensive downward drift over the
past month with 8 analysts (out of 17) having slashed their
forecasts with none moving in the opposite direction. No activity
was witnessed over the past week.
Estimate for the June quarter decreased by three cents over the
past month while remaining static over the past week. Given the
directional pressure from a slew of negative revisions, the
estimate for 2012 decreased by 5 cents over the past 30 days.
However, estimate for the year remained stationary (at $2.48 a
share) over the past 7 days.
Dow is benefiting from strong fundamentals in agriculture and food
markets. The company's performance in the emerging markets remains
strong and we expect this to continue in the June quarter.
A string of innovative products in its pipeline also adds to its
strength. Among notable new offerings, Dow recently introduced
POWERHOUSE, the nation's first solar shingle roof product, across
select markets. The company projects new product sales to reach
$800 million by 2013.
Dow expects its downstream, market-driven businesses to continue to
capture value from improving North American feedstock dynamics. It
anticipates the favorable trend in the ethylene industry to
continue. The company's strategic initiatives (including technology
licensing deals) are expected to boost ethylene production
capabilities, thereby offering significant opportunity for margin
Moreover, Dow continues to focus on cost containment
initiatives. As part of the move, the company is closing its
manufacturing facilities in Europe, North America and Latin America
and reducing headcount. Dow anticipates savings of roughly $250
million annually from these actions.
DU PONT (EI) DE (DD): Free Stock Analysis
DOW CHEMICAL (DOW): Free Stock Analysis Report
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However, Dow is witnessing softness in the electronics and
construction end-markets, which may weigh on its second quarter
results. The construction market in Europe remains soft. Moreover,
the company will continue facing challenges in Western Europe due
to weak demand and the sovereign debt crisis.
We currently have a long-term Neutral recommendation on Dow
Chemical. The company, which competes with
EI DuPont de Nemours & Co.
), retains a Zacks #3 Rank, indicating a short-term Hold