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What Makes Dow (DOW) a Solid Investment Option Right Now
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Dow Inc.’s (DOW - Free Report) stock looks promising at the moment. The company’s shares have shot up 67.9% over the past six months, outperforming its industry’s 57.7% rise. It is benefiting from cost synergy savings and productivity initiatives and its investment in high-return projects.
We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.
Dow currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
Let’s delve deeper into the factors that make Dow an intriguing choice for investors right now.
Estimates Northbound
Earnings estimate revisions have the greatest impact on stock prices. Over the past month, the Zacks Consensus Estimate for Dow for the current year has increased 15.6%. The consensus estimate for 2021 has also been revised 8.1% upward over the same time frame.
Positive Earnings Surprise History
Dow has outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of roughly 11.7%, on average.
Superior Return on Equity (ROE)
Dow’s ROE of 10.3%, as compared with the industry average of 9.6%, manifests the company’s efficiency in utilizing shareholder’s funds.
Capital Allocation
Dow remains committed to return value to its shareholders by leveraging strong cash flows. It generated operating cash flows from continuing operations of $1.6 billion in the second quarter of 2020. It also generated free cash flow of $1.3 billion in the quarter. The company returned $516 million in dividends to its shareholders in the second quarter. Dow is also taking actions to further strengthen its financial position.
Growth Drivers in Place
Dow should gain from cost synergy savings and productivity actions. It focuses on maintaining cost and operational discipline through cost synergy as well as stranded cost-removal initiatives.
The company delivered more than $600 million in cost synergy and stranded costs savings in 2019. It expects to complete its stranded costs removal target in 2020 and capture around $140 million of savings.
Dow is also taking actions to cut operating expenses by $500 million through additional structural cost actions, which is expected to lend support to its earnings in 2020. The company also expects to realize more than $300 million annualized EBITDA benefit by the end of next year from a restructuring program being initiated in the third quarter of 2020. This includes a 6% reduction in its global workforce and actions to exit uncompetitive assets.
Dow is also benefiting from higher demand for its materials across healthcare and packaging markets, thanks to the coronavirus pandemic. The outbreak has led to a surge in demand for health, hygiene and safety products.
Moreover, the company remains committed to invest in attractive areas through highly accretive projects. It is investing in several high-return growth projects including the expansion of downstream silicones capacity. Dow completed 16 silicones incremental expansion projects last year, which provided additional downstream capability.
Other top-ranked stocks stocks worth considering in the basic materials space include AngloGold Ashanti Limited (AU - Free Report) , Barrick Gold Corporation (GOLD - Free Report) and Yamana Gold Inc. .
AngloGold Ashanti has a projected earnings growth rate of 124.2% for the current year. The company’s shares have gained roughly 25% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold has a projected earnings growth rate of 80.4% for the current year. The company’s shares have rallied around 51% in a year. It currently has a Zacks Rank #2.
Yamana Gold has an expected earnings growth rate of 76.9% for the current year. The company’s shares have surged around 63% in the past year. It currently carries a Zacks Rank #2.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
Image: Bigstock
What Makes Dow (DOW) a Solid Investment Option Right Now
Dow Inc.’s (DOW - Free Report) stock looks promising at the moment. The company’s shares have shot up 67.9% over the past six months, outperforming its industry’s 57.7% rise. It is benefiting from cost synergy savings and productivity initiatives and its investment in high-return projects.
We are positive on the company’s prospects and believe that the time is right for you to add the stock to the portfolio as it looks promising and is poised to carry the momentum ahead.
Dow currently has a Zacks Rank #1 (Strong Buy) and a VGM Score of A. Our research shows that stocks with a VGM Score of A or B, combined with a Zacks Rank #1 or 2 (Buy), offer the best investment opportunities for investors.
Let’s delve deeper into the factors that make Dow an intriguing choice for investors right now.
Estimates Northbound
Earnings estimate revisions have the greatest impact on stock prices. Over the past month, the Zacks Consensus Estimate for Dow for the current year has increased 15.6%. The consensus estimate for 2021 has also been revised 8.1% upward over the same time frame.
Positive Earnings Surprise History
Dow has outpaced the Zacks Consensus Estimate in each of the trailing four quarters. In this time frame, it has delivered an earnings surprise of roughly 11.7%, on average.
Superior Return on Equity (ROE)
Dow’s ROE of 10.3%, as compared with the industry average of 9.6%, manifests the company’s efficiency in utilizing shareholder’s funds.
Capital Allocation
Dow remains committed to return value to its shareholders by leveraging strong cash flows. It generated operating cash flows from continuing operations of $1.6 billion in the second quarter of 2020. It also generated free cash flow of $1.3 billion in the quarter. The company returned $516 million in dividends to its shareholders in the second quarter. Dow is also taking actions to further strengthen its financial position.
Growth Drivers in Place
Dow should gain from cost synergy savings and productivity actions. It focuses on maintaining cost and operational discipline through cost synergy as well as stranded cost-removal initiatives.
The company delivered more than $600 million in cost synergy and stranded costs savings in 2019. It expects to complete its stranded costs removal target in 2020 and capture around $140 million of savings.
Dow is also taking actions to cut operating expenses by $500 million through additional structural cost actions, which is expected to lend support to its earnings in 2020. The company also expects to realize more than $300 million annualized EBITDA benefit by the end of next year from a restructuring program being initiated in the third quarter of 2020. This includes a 6% reduction in its global workforce and actions to exit uncompetitive assets.
Dow is also benefiting from higher demand for its materials across healthcare and packaging markets, thanks to the coronavirus pandemic. The outbreak has led to a surge in demand for health, hygiene and safety products.
Moreover, the company remains committed to invest in attractive areas through highly accretive projects. It is investing in several high-return growth projects including the expansion of downstream silicones capacity. Dow completed 16 silicones incremental expansion projects last year, which provided additional downstream capability.
Dow Inc. Price and Consensus
Dow Inc. price-consensus-chart | Dow Inc. Quote
Stocks to Consider
Other top-ranked stocks stocks worth considering in the basic materials space include AngloGold Ashanti Limited (AU - Free Report) , Barrick Gold Corporation (GOLD - Free Report) and Yamana Gold Inc. .
AngloGold Ashanti has a projected earnings growth rate of 124.2% for the current year. The company’s shares have gained roughly 25% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold has a projected earnings growth rate of 80.4% for the current year. The company’s shares have rallied around 51% in a year. It currently has a Zacks Rank #2.
Yamana Gold has an expected earnings growth rate of 76.9% for the current year. The company’s shares have surged around 63% in the past year. It currently carries a Zacks Rank #2.
5 Stocks Set to Double
Each was hand-picked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2020. Each comes from a different sector and has unique qualities and catalysts that could fuel exceptional growth.
Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.
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