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Dow's (DOW) Earnings and Revenues Trounce Estimates in Q3
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Dow Inc. (DOW - Free Report) logged loss (on a reported basis) of 4 cents per share for third-quarter 2020 against earnings of 45 cents per share a year ago. The bottom line in the reported quarter was hit by restructuring and asset-related charges.
Barring one-time items, adjusted earnings were 50 cents per share for the reported quarter, topping the Zacks Consensus Estimate of 33 cents.
Dow raked in net sales of $9,712 million for the quarter, down roughly 10% year over year. It, however, surpassed the Zacks Consensus Estimate of $9,340.3 million. Sales fell due to lower local pricing resulting from reduced global energy prices. Dow saw a 9% decline in local prices in the reported quarter.
Volumes fell 1% year over year in the quarter. However, volumes rose 9% on a sequential comparison basis on improved demand across furniture & bedding, appliances, packaging, construction and automotive end markets.
Packaging & Specialty Plastics: The division’s sales fell 10% year over year to $4.6 billion in the reported quarter, hurt by reduced polyethylene prices. Volumes edged up 1% while local prices slipped 12%. Currency increased sales by 1%.
Industrial Intermediates & Infrastructure: Sales for the unit fell 9% year over year to $3.1 billion. Volumes fell 3% on lower demand in automotive, industrial and energy markets while local prices declined 7%. Currency increased sales by 1%.
Performance Materials & Coatings: Revenues from the division went down 11% year over year to $2 billion. Sales were impacted by volumes and local price declines of 5% and 6%, respectively. The impact of currency was flat. Volumes were hurt by declines in automotive, construction and oil & gas applications.
Financials
Dow had cash and cash equivalents of $4,549 million at the end of the quarter. Long-term debt was $16,698 million.
Cash provided by operating activities from continuing operations was $1.8 billion in the reported quarter while free cash flow was $1.5 billion.
Dow also returned $518 million to shareholders in the third quarter through dividends. It also achieved a net debt improvement in excess of $1.8 billion year to date.
Outlook
Moving ahead, Dow noted that it expects the rebound that it witnessed in its markets in the third quarter to continue in the near term. The company said that it entered the fourth quarter with momentum on a sequential comparison basis, improved financial flexibility and a consistent focus on cash. It remains focused to deliver against its strategic and operational objectives.
Moreover, Dow is implementing a restructuring program that will rationalize certain manufacturing assets and lower global workforce costs by nearly 6%. The company expects these actions to generate total annualized EBITDA savings of more than $300 million by the end of 2021.
The company also completed the divestment of its North American rail infrastructure assets in the third quarter for $315 million. It also entered into an agreement to divest certain U.S. Gulf Coast marine and terminal operations and assets, with expected cash proceeds of $620 million at transaction closure before end-2020.
Price Performance
Dow’s shares are down 11.3% year to date, compared with a 1.1% decline recorded by the industry.
Zacks Rank & Stocks to Consider
Dow currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited (AEM - Free Report) , Eldorado Gold Corporation (EGO - Free Report) and Barrick Gold Corporation (GOLD - Free Report) .
Agnico Eagle has a projected earnings growth rate of 104.1% for the current year. The company’s shares have rallied around 51% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Eldorado Gold has a projected earnings growth rate of 2,450% for the current year. The company’s shares have shot up roughly 73% in a year. It currently carries a Zacks Rank #1.
Barrick Gold has an expected earnings growth rate of 96.1% for the current year. The company’s shares have surged around 65% in the past year. It currently carries a Zacks Rank #1.
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Dow's (DOW) Earnings and Revenues Trounce Estimates in Q3
Dow Inc. (DOW - Free Report) logged loss (on a reported basis) of 4 cents per share for third-quarter 2020 against earnings of 45 cents per share a year ago. The bottom line in the reported quarter was hit by restructuring and asset-related charges.
Barring one-time items, adjusted earnings were 50 cents per share for the reported quarter, topping the Zacks Consensus Estimate of 33 cents.
Dow raked in net sales of $9,712 million for the quarter, down roughly 10% year over year. It, however, surpassed the Zacks Consensus Estimate of $9,340.3 million. Sales fell due to lower local pricing resulting from reduced global energy prices. Dow saw a 9% decline in local prices in the reported quarter.
Volumes fell 1% year over year in the quarter. However, volumes rose 9% on a sequential comparison basis on improved demand across furniture & bedding, appliances, packaging, construction and automotive end markets.
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 10% year over year to $4.6 billion in the reported quarter, hurt by reduced polyethylene prices. Volumes edged up 1% while local prices slipped 12%. Currency increased sales by 1%.
Industrial Intermediates & Infrastructure: Sales for the unit fell 9% year over year to $3.1 billion. Volumes fell 3% on lower demand in automotive, industrial and energy markets while local prices declined 7%. Currency increased sales by 1%.
Performance Materials & Coatings: Revenues from the division went down 11% year over year to $2 billion. Sales were impacted by volumes and local price declines of 5% and 6%, respectively. The impact of currency was flat. Volumes were hurt by declines in automotive, construction and oil & gas applications.
Financials
Dow had cash and cash equivalents of $4,549 million at the end of the quarter. Long-term debt was $16,698 million.
Cash provided by operating activities from continuing operations was $1.8 billion in the reported quarter while free cash flow was $1.5 billion.
Dow also returned $518 million to shareholders in the third quarter through dividends. It also achieved a net debt improvement in excess of $1.8 billion year to date.
Outlook
Moving ahead, Dow noted that it expects the rebound that it witnessed in its markets in the third quarter to continue in the near term. The company said that it entered the fourth quarter with momentum on a sequential comparison basis, improved financial flexibility and a consistent focus on cash. It remains focused to deliver against its strategic and operational objectives.
Moreover, Dow is implementing a restructuring program that will rationalize certain manufacturing assets and lower global workforce costs by nearly 6%. The company expects these actions to generate total annualized EBITDA savings of more than $300 million by the end of 2021.
The company also completed the divestment of its North American rail infrastructure assets in the third quarter for $315 million. It also entered into an agreement to divest certain U.S. Gulf Coast marine and terminal operations and assets, with expected cash proceeds of $620 million at transaction closure before end-2020.
Price Performance
Dow’s shares are down 11.3% year to date, compared with a 1.1% decline recorded by the industry.
Zacks Rank & Stocks to Consider
Dow currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks worth considering in the basic materials space include Agnico Eagle Mines Limited (AEM - Free Report) , Eldorado Gold Corporation (EGO - Free Report) and Barrick Gold Corporation (GOLD - Free Report) .
Agnico Eagle has a projected earnings growth rate of 104.1% for the current year. The company’s shares have rallied around 51% in a year. It currently sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Eldorado Gold has a projected earnings growth rate of 2,450% for the current year. The company’s shares have shot up roughly 73% in a year. It currently carries a Zacks Rank #1.
Barrick Gold has an expected earnings growth rate of 96.1% for the current year. The company’s shares have surged around 65% in the past year. It currently carries a Zacks Rank #1.
Breakout Biotech Stocks with Triple-Digit Profit Potential
The biotech sector is projected to surge beyond $775 billion by 2024 as scientists develop treatments for thousands of diseases. They’re also finding ways to edit the human genome to literally erase our vulnerability to these diseases.
Zacks has just released Century of Biology: 7 Biotech Stocks to Buy Right Now to help investors profit from 7 stocks poised for outperformance. Our recent biotech recommendations have produced gains of +50%, +83% and +164% in as little as 2 months. The stocks in this report could perform even better.
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