Dow Set to Retire Debt - Analyst Blog

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In a bid to reduce its debt, The Dow Chemical Company ( DOW ) has launched cash tender offers for up to $500 million aggregate principal amount of notes issued by the company and its fully-owned unit Rohm and Haas Company. The company has appointed BNP PARIBAS and BofA Merrill Lynch as dealer managers for the tender offers. The offer is set to expire on Nov 27, 2013.

The move highlights Dow's strategy to enhance its financial flexibility. So far this year, the company has cut its debt by $2.4 billion which has in turn led to declined interest expense of about $120 million. Further reduction in interest expense will allow Dow to post increased earnings and deliver healthy returns to its shareholders.

Dow's continued efforts to de-leverage its balance sheet led to a reduction in net debt-to-total capitalization ratio to 34.7% in the third quarter of 2013, down from 39.7% a year ago. The company generated operating cash flows of $1.4 billion in the quarter, up 27% year over year.

Dow raked in a profit of $594 million or 49 cents a share in the third quarter, a 20% rise from $497 million or 42 cents a share registered a year ago. Barring costs associated with its restructuring program, Dow earned 50 cents a share in the quarter. That, however, missed the Zacks Consensus Estimate by 4 cents.

Revenues crept up roughly 1% year over year to $13,734 million in the reported quarter as gains from agricultural sciences, coatings, performance plastics and electronics were offset by declines in performance materials and feedstocks and energy. Sales in emerging markets rose 5%. However, revenues missed the Zacks Consensus Estimate of $13,946 million.

Dow currently carries a Zacks Rank #3 (Hold).

Other companies in the chemical industry worth considering are Praxair ( PX ), DuPont ( DD ) and BASF ( BASFY ). All of them hold a Zacks Rank #2 (Buy).

BASF SE (BASFY): Get Free Report

DU PONT (EI) DE (DD): Free Stock Analysis Report

DOW CHEMICAL (DOW): Free Stock Analysis Report

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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