Back to top

Image: Bigstock

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

Read MoreHide Full Article

Dow Inc.’s (DOW - Free Report) stock looks promising at the moment. The company’s shares have popped 15% so far this year. It is benefiting from cost synergy savings and productivity initiatives, strengthening 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.

Dow currently has a Zacks Rank #2 (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 (Strong Buy) or 2, offer the best investment opportunities for investors.

Let’s delve deeper into the factors that make Dow an attractive choice for investors right now.

An Outperformer

Shares of Dow have rallied 38.4% over a year against the 28.3% rise of its industry. It has also outperformed the S&P 500’s 30.3% rise over the same period.

 

Zacks Investment Research
Image Source: Zacks Investment Research

 

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 17.9%. The consensus estimate for third-quarter 2021 has also been revised 26.6% 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 25.6%.

Solid Growth Prospects

The Zacks Consensus Estimate for earnings for the current year for Dow is currently pegged at $8.35, reflecting an expected year-over-year growth of 403%. Moreover, earnings are expected to register a 404% growth in the third quarter of 2021.

Growth Drivers in Place

Dow should gain from cost synergy savings and productivity actions. The company focuses on maintaining cost and operational discipline. It 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 higher demand across a number of markets including automotive, consumer durable, electronics and construction amid the ongoing economic recovery. It is also benefiting from strong 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.

Dow, in its second-quarter call, said that it expects earnings momentum from additional improvements in consumer spending, industrial production and international travel.

The company remains focused on investing in attractive areas through highly accretive projects. It is investing in several high-return growth projects including the expansion of downstream silicones capacity. It is executing a number of downstream silicones expansion projects this year.

Dow is also committed to return value to its shareholders by leveraging healthy cash flows. It generated cash flow from operating activities of $2 billion and returned $722 million to shareholders in the second quarter of 2021 through dividends and share repurchases.

 

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) , ArcelorMittal (MT - Free Report) and AdvanSix Inc. (ASIX - Free Report) , each sporting a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nucor has a projected earnings growth rate of 494% for the current year. The company’s shares have surged around 163% in a year.

ArcelorMittal has an expected earnings growth rate of 1,731.2% for the current year. The company’s shares have shot up around 182% in the past year.

AdvanSix has an expected earnings growth rate of around 160.4% for the current year. The company’s shares have gained roughly 160% in the past year.

Published in