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Dow (DOW) Warms Up to Q3 Earnings: What's in the Offing?

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Dow Inc. (DOW - Free Report) is scheduled to come up with third-quarter 2021 results before the opening bell on Oct 21. The company’s third-quarter results are expected to reflect the benefits of cost-reduction initiatives, higher prices and strong demand across a number of end markets. However, plant turnaround costs are likely to have affected its performance.

The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 25.6%. It posted an earnings surprise of 9.7% in the last reported quarter.

Dow’s shares have gained 20.7% over a year compared with 22.8% rise recorded by the industry.

 

Zacks Investment ResearchImage Source: Zacks Investment Research



Let’s see how things are shaping up for this announcement.

What do the Estimates Say?

Dow expects revenues for the third quarter to be in the band of $13.75-$14.25 billion.

The Zacks Consensus Estimate for revenues for Dow is currently pegged at $14,373 million, suggesting a rise of 48% year over year.

Some Factors at Play

Dow is likely to have benefited, in the third quarter, 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. Higher demand across automotive, consumer durable, electronics and construction markets amid the ongoing economic recovery is also likely to have supported its results. Higher prices aided by strong consumer demand and low inventory levels are also expected to have boosted Dow’s top line in the third quarter.

The company is also expected to have gained from cost synergy savings and productivity actions in the quarter to be reported. It remains focused on maintaining cost and operational discipline. Dow expects to realize more than $300 million annualized EBITDA benefit from its restructuring program that is likely to be substantially complete by end-2021. Some benefits of these actions are likely to get reflected on the company’s bottom line in the September quarter.

However, the company is likely to have faced headwind from higher plant turnaround costs in the third quarter. It envisions increased turnaround spending of roughly $150 million on a sequential comparison basis in the third quarter associated with planned maintenance at its crackers in Canada and in Spain. The company sees the associated unfavorable impact in the quarter in its Packaging & Specialty Plastics unit. It also expects higher turnaround spending of roughly $30 million in the consumer solutions business in the third quarter, including a turnaround at its siloxane pillar plant in Barry. Another $30 million headwind is expected from maintenance turnaround spending at the company’s joint ventures. As such, turnaround costs are expected to have impacted margins in the third quarter.

 

Dow Inc. Price and EPS Surprise

 

Dow Inc. Price and EPS Surprise

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

 

Zacks Model

Our proven model does not conclusively predict an earnings beat for Dow this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for Dow is -1.93%. The Zacks Consensus Estimate for earnings for the third quarter is currently pegged at $2.57. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Dow currently carries a Zacks Rank #3.

Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

Olin Corporation (OLN - Free Report) , scheduled to release earnings on Oct 21, has an Earnings ESP of +7.45% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Nutrien Ltd. (NTR - Free Report) , scheduled to release earnings on Nov 1, has an Earnings ESP of +0.77% and carries a Zacks Rank #1.

United States Steel Corporation (X - Free Report) , scheduled to release earnings on Oct 28, has an Earnings ESP of +2.86% and carries a Zacks Rank #2.

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