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Here's Why You Should Add Dow (DOW) Stock to Your Portfolio

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Dow Inc.’s (DOW - Free Report) stock looks promising at the moment. The company’s shares have shot up 37% over the past six months. It is benefiting from cost synergy savings and productivity initiatives, improving demand across a number of major markets and 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.

Let’s delve deeper into the factors that make this Zacks Rank #2 (Buy) stock an attractive choice for investors right now.

An Outperformer

Shares of Dow have rallied 123.1% over a year against the 98.1% rise of its industry. It has also outperformed the S&P 500’s 69.8% rise over the same period.

 

 

Estimates Northbound

Earnings estimate revisions have the greatest impact on stock prices. Over the past two months, the Zacks Consensus Estimate for Dow for the current year has increased 40.1%. The consensus estimate for 2022 has also been revised 20.8% 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 average earnings surprise of roughly 21%.

Capital Allocation

Dow remains committed to return value to its shareholders by leveraging healthy cash flows. It generated strong operating cash flows from continuing operations of $6.3 billion and free cash flow of $5 billion in 2020. The company also returned $2.1 billion in dividends to its shareholders in 2020. 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. The company focuses on maintaining cost and operational discipline. Dow achieved roughly $500 million in operating expense reductions in 2020.

The company also expects to realize more than $300 million annualized EBITDA benefit from a restructuring program being initiated in the third quarter of 2020. Dow expects the restructuring program to be substantially complete by end-2021.

Dow is also seeing a rebound in demand across a number of markets including automotive, consumer durable and construction amid the ongoing economic recovery. It 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.

The company also 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 Inc. Price and Consensus

 

Dow Inc. Price and Consensus

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

 

Stocks to Consider

Other top-ranked stocks worth considering in the basic materials space include Nucor Corporation (NUE - Free Report) , Fortescue Metals Group Limited (FSUGY - Free Report) and United States Steel Corporation (X - Free Report) .

Nucor has a projected earnings growth rate of 122.5% for the current year. The company’s shares have surged around 118% 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.

Fortescue has a projected earnings growth rate of 107.8% for the current fiscal. The company’s shares have surged around 145% in a year. It currently sports a Zacks Rank #1.

U.S. Steel has an expected earnings growth rate of 201.1% for the current year. The company’s shares have surged around 266% in the past year. It currently carries a Zacks Rank #2.

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