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Dow Inc. (DOW - Free Report) is expected to benefit from cost synergy savings and productivity actions and investment in high-return projects. However, it faces challenges from soft demand due to weak global economic activities.
The company’s shares are down 21.8% over a year compared with a 9.2% decline recorded by its industry.
Image Source: Zacks Investment Research
Dow, a Zacks Rank #3 (Hold) stock, is expected to gain from cost and productivity initiatives. It focuses on maintaining cost and operational discipline. The company is realizing a full $300 million EBITDA run rate benefit from restructuring programs being initiated in the third quarter of 2020.
The company also expects its investment in digital initiatives to drive efficiency and allow it to realize $300 million EBITDA run rate by the end of 2023. The company is also implementing targeted actions focused on optimizing labor and purchased service costs, lowering turnaround spending and boosting productivity. Dow expects these initiatives to deliver $1 billion in cost savings in 2023.
Moreover, DOW 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.
The company completed its Fort Saskatchewan expansion in 2021, which is expected to support higher polyethylene demand. The company also commissioned its fluidized catalytic dehydrogenation pilot plant in Louisiana in fourth-quarter 2022 to manufacture propylene for coatings, electronics and durables markets. It also delivered silicones downstream debottlenecking projects last year.
However, Dow faces headwinds from weaker demand in Europe and Asia. Lower consumer spending amid inflationary pressures is affecting demand in Europe. In the Performance Materials & Coatings segment, the company is seeing weaker demand in consumer electronics and industrial end markets.
Softness across these markets are likely to hurt volumes in Performance Materials & Coatings in second-quarter 2023. Inflationary pressures are also impacting consumer durables and building and construction demand in Europe, affecting the Industrial Intermediates & Infrastructure segment.
The company also faces headwinds from plant turnaround costs in the second quarter. It sees increased planned maintenance activities in the Packaging & Specialty Plastics segment in the quarter. Dow expects an associated headwind of roughly $25 million in the second quarter.
The Industrial Intermediates & Infrastructure unit is also expected to face a $50 million headwind in the quarter related to turnaround at its Louisiana glycols facility. Costs associated with turnarounds are likely to impact Dow's margins.
Better-ranked stocks worth considering in the basic materials space include L.B. Foster Company (FSTR - Free Report) , Gold Fields Limited (GFI - Free Report) , and Linde plc (LIN - Free Report) .
L.B. Foster currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for FSTR's current-year earnings has been stable over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
L.B. Foster’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 140.5%, on average. FSTR has gained around 5% in a year.
Gold Fields currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for GFI’s current-year earnings has been revised 23.5% upward in the past 60 days.
The consensus estimate for current-year earnings for GFI is currently pegged at $1.05, reflecting an expected year-over-year growth of 8.3%. Gold Fields’ shares have popped roughly 63% in the past year.
Linde currently carries a Zacks Rank #2. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 4.4% upward in the past 60 days.
Linde beat Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 6.9% on average. LIN’s shares have gained roughly 10% in the past year.
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Dow (DOW) Gains on Cost & Productivity Actions Amid Demand Woes
Dow Inc. (DOW - Free Report) is expected to benefit from cost synergy savings and productivity actions and investment in high-return projects. However, it faces challenges from soft demand due to weak global economic activities.
The company’s shares are down 21.8% over a year compared with a 9.2% decline recorded by its industry.
Image Source: Zacks Investment Research
Dow, a Zacks Rank #3 (Hold) stock, is expected to gain from cost and productivity initiatives. It focuses on maintaining cost and operational discipline. The company is realizing a full $300 million EBITDA run rate benefit from restructuring programs being initiated in the third quarter of 2020.
The company also expects its investment in digital initiatives to drive efficiency and allow it to realize $300 million EBITDA run rate by the end of 2023. The company is also implementing targeted actions focused on optimizing labor and purchased service costs, lowering turnaround spending and boosting productivity. Dow expects these initiatives to deliver $1 billion in cost savings in 2023.
Moreover, DOW 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.
The company completed its Fort Saskatchewan expansion in 2021, which is expected to support higher polyethylene demand. The company also commissioned its fluidized catalytic dehydrogenation pilot plant in Louisiana in fourth-quarter 2022 to manufacture propylene for coatings, electronics and durables markets. It also delivered silicones downstream debottlenecking projects last year.
However, Dow faces headwinds from weaker demand in Europe and Asia. Lower consumer spending amid inflationary pressures is affecting demand in Europe. In the Performance Materials & Coatings segment, the company is seeing weaker demand in consumer electronics and industrial end markets.
Softness across these markets are likely to hurt volumes in Performance Materials & Coatings in second-quarter 2023. Inflationary pressures are also impacting consumer durables and building and construction demand in Europe, affecting the Industrial Intermediates & Infrastructure segment.
The company also faces headwinds from plant turnaround costs in the second quarter. It sees increased planned maintenance activities in the Packaging & Specialty Plastics segment in the quarter. Dow expects an associated headwind of roughly $25 million in the second quarter.
The Industrial Intermediates & Infrastructure unit is also expected to face a $50 million headwind in the quarter related to turnaround at its Louisiana glycols facility. Costs associated with turnarounds are likely to impact Dow's margins.
Dow Inc. Price and Consensus
Dow Inc. price-consensus-chart | Dow Inc. Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include L.B. Foster Company (FSTR - Free Report) , Gold Fields Limited (GFI - Free Report) , and Linde plc (LIN - Free Report) .
L.B. Foster currently carries a Zacks Rank #1 (Strong Buy). The Zacks Consensus Estimate for FSTR's current-year earnings has been stable over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
L.B. Foster’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 140.5%, on average. FSTR has gained around 5% in a year.
Gold Fields currently carries a Zacks Rank #2 (Buy). The Zacks Consensus Estimate for GFI’s current-year earnings has been revised 23.5% upward in the past 60 days.
The consensus estimate for current-year earnings for GFI is currently pegged at $1.05, reflecting an expected year-over-year growth of 8.3%. Gold Fields’ shares have popped roughly 63% in the past year.
Linde currently carries a Zacks Rank #2. The Zacks Consensus Estimate for LIN’s current-year earnings has been revised 4.4% upward in the past 60 days.
Linde beat Zacks Consensus Estimate in each of the last four quarters. It delivered a trailing four-quarter earnings surprise of 6.9% on average. LIN’s shares have gained roughly 10% in the past year.