Dow's (DOW) Earnings and Revenues Surpass Estimates in Q3

Dow Inc. DOW logged earnings (on a reported basis) of 45 cents per share for third-quarter 2019, down from $1.36 per share a year ago.

Barring one-time items including environmental charges, earnings were 91 per share for the reported quarter, topping the Zacks Consensus Estimate of 72 cents. The company gained from its actions to reduce costs in the quarter.

Dow raked in net sales of $10,764 million, down 15% from the adjusted sales a year ago. It, however, beat the Zacks Consensus Estimate of $10,707.6 million.

Sales fell due to lower local pricing resulting from a decline in global energy prices. Currency reduced sales by 1% in the quarter.

Volumes fell 2% in the quarter, affected by lower hydrocarbon co-product sales that more than offset higher demand in packaging, polyurethanes and silicones applications. The company also saw a 12% decline in local prices.

Dow Inc. Price, Consensus and EPS Surprise

Dow Inc. price-consensus-eps-surprise-chart | Dow Inc. Quote

Segment Highlights

Packaging & Specialty Plastics: The division’s sales fell 18% from the adjusted sales a year ago to $5.1 billion in the quarter. Volumes fell 4% while local prices slipped 13%. Currency also reduced sales by 1%.

Industrial Intermediates & Infrastructure: Sales for the unit fell 14% to $3.4 billion. Volumes were flat while local prices fell 13%. Currency lowered sales by 1%.

Performance Materials & Coatings: Revenues from the division went down 12% to $2.3 billion. Sales were impacted by volumes and local price declines of 1% and 10%, respectively. Currency also reduced sales by 1%.

Financials
 
Dow had cash and cash equivalents of $2,823 million at the end of the quarter. Long-term debt was $17,213 million.

Cash provided by operating activities from continuing operations was $1.8 billion in the quarter while free cash flow was $1.3 billion.

Dow returned $0.6 billion to shareholders in the quarter through dividend and share repurchase.

Moreover, Dow completed its roughly $1.37 billion cost synergy program and removed $40 million of stranded costs in the third quarter.

Outlook

Looking ahead, Dow said that it will remain focused on investing in higher-return growth projects, achieving its stranded cost removal target and leveraging its feedstock flexibility in the prevailing market environment. It will also remain committed in driving free cash flows. 

Price Performance

Dow’s shares are down around 7% over the past three months, compared with the roughly 4.9% decline recorded by the industry.

Zacks Rank & Key Picks

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

Better-ranked stocks worth a look in the basic materials space include Agnico Eagle Mines Limited AEM, Kinross Gold Corporation KGC and Franco-Nevada Corporation FNV, all sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 158.6% for the current year. The company’s shares have rallied 53% in a year’s time.

Kinross has projected earnings growth rate of 170% for the current year. The company’s shares have surged around 77% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 35.9% for the current year. The company’s shares have gained roughly 54% in a year’s time.

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