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Dow (DOW) Gears Up for Q4 Earnings: What's in the Cards?

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Dow Inc. (DOW - Free Report) is scheduled to come up with fourth-quarter 2021 results before the opening bell on Jan 27. The company is expected to have benefited from cost-reduction initiatives, higher prices and strong demand across a number of end markets. However, plant turnaround costs, and raw material and energy cost inflation are likely to have affected its fourth-quarter performance.

The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 14.1%. It posted an earnings surprise of 5.8% in the last reported quarter.

Dow’s shares are down 0.9% over a year compared with a 4.8% rise recorded by the industry.

 

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

What do the Estimates Say?

Dow expects revenues for the fourth quarter to be in the band of $14-$14.5 billion.

The Zacks Consensus Estimate for revenues for Dow is currently pegged at $14,325 million, suggesting a rise of 33.8% year over year.

Some Factors at Play

Dow is likely to have benefited, in the fourth quarter, from higher demand for its materials across healthcare and packaging markets. The pandemic has led to a surge in demand for health, hygiene and safety products. Higher demand across mobility, personal care, electronics and construction markets amid the ongoing economic recovery is also likely to have supported its results.

The company is also expected to have gained from cost synergy savings and productivity actions in the December quarter. It remains focused on maintaining cost and operational discipline. Benefits of its restructuring program are also likely to get reflected on its bottom line in the fourth quarter.

However, the company is likely to have faced headwinds from higher plant turnaround costs in the fourth quarter. In the Industrial Intermediates & Infrastructure unit, some of the planned turnarounds were deferred to the fourth quarter due to weather-related outages in the third quarter. Another unfavorable impact is expected in the quarter from turnaround at Sadara’s isocyanates facility.

Dow expects a combined impact of around $100 million in this segment from turnarounds in the fourth quarter. Another $75 million headwind is expected in the Performance Materials & Coatings unit from a turnaround at the company’s siloxane facility in China. As such, turnaround costs are expected to have impacted margins in the fourth quarter.

The company is also expected to have witnessed challenges from higher raw material and energy costs in the fourth quarter. It sees $350 million headwind in the Packaging & Specialty Plastics segment associated with raw material and energy cost inflation and logistical challenges. Dow also envisions roughly $100 million headwind in Industrial Intermediates & Infrastructure in the fourth quarter stemming from higher energy costs in the U.S. Gulf Coast and Europe and logistics issues. The Performance Materials & Coatings unit is also forecast to witness $50 million headwind related to higher raw material costs and logistical constraints.

 

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 -2.79%. The Zacks Consensus Estimate for earnings for the fourth quarter is currently pegged at $2.04. 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 these have the right combination of elements to post an earnings beat this quarter:

Olin Corporation (OLN - Free Report) , scheduled to release earnings on Jan 27, has an Earnings ESP of +1.95% and carries a Zacks Rank #3. You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Olin's fourth-quarter earnings has been revised 4.1% upward over the past 60 days. The consensus estimate for OLN’s earnings for the quarter is currently pegged at $2.53.

CF Industries Holdings, Inc. (CF - Free Report) , expected to release earnings on Feb 16, has an Earnings ESP of +9.44% and carries a Zacks Rank #2.

The consensus estimate for CF Industries' fourth-quarter earnings has been revised 40.1% upward over the past 60 days. The Zacks Consensus Estimate for CF’s earnings for the quarter stands at $3.25.

Celanese Corporation (CE - Free Report) , scheduled to release earnings on Jan 27, has an Earnings ESP of +2.98% and carries a Zacks Rank #3.

The Zacks Consensus Estimate for Celanese's fourth-quarter earnings has been revised 0.6% upward over the past 60 days. The consensus estimate for CE’s earnings for the quarter is currently pegged at $5.05.

Stay on top of upcoming earnings announcements with the Zacks Earnings Calendar.


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