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Dow generated $1.84 billion in operating cash flow and $1.1 billion in free cash flow in Q3.
Cost pressures, geopolitical disruptions and uneven global demand continue to challenge Dow.
Dow Inc. (DOW - Free Report) benefits from cost and productivity initiatives, growth actions in attractive markets, and an advantaged feedstock position amid a challenging macroeconomic backdrop.
The company’s shares have gained 38.8% over a year compared with the Zacks Chemicals Diversified industry’s 17.1% increase.
Image Source: Zacks Investment Research
Let’s find out why DOW stock is worth retaining at the moment.
DOW Gains on High-Return Growth Projects & Self-Help Actions
Dow is well positioned with its differentiated portfolio and advantaged feedstock positions in the Americas. It remains focused on investing in attractive areas. Its broad portfolio, significant low-cost feedstock positions, global footprint and market reach place it in an advantageous position against competitors. While Dow faces headwinds from heightened macroeconomic and geopolitical uncertainties, it remains focused on growth actions in attractive end markets and executing high-return incremental growth projects in cost-advantaged regions.
Recent alkoxylation investments are contributing to growth in the Industrial Solutions business. Demand for artificial intelligence (AI) infrastructure and energy applications supported Industrial Solutions volume growth in the third quarter of 2026.
Dow is also expanding specialty silicones capabilities for mobility, electronics and healthcare while increasing its emphasis on higher-value downstream applications. Engineered silicone materials expansions in China and Japan started up in the third quarter, while liquid silicone rubber expansions in the United States and China are scheduled for 2027.
Dow has completed the shutdown of its higher-cost Barry, U.K., upstream siloxanes unit, shifting its silicones mix by more than 25% toward more stable and higher-margin businesses while maintaining value-chain integration. The company also restarted its lowest-cost and most flexible European cracker in Terneuzen. The Alberta integrated ethylene complex Phase 1 start-up is targeted for 2029 and Phase 2 by year-end 2030, adding top-quartile capacity serving packaging applications.
Dow continues to emphasize cost and operational discipline through restructuring, productivity and process simplification. The company materially completed its $1 billion 2025 cost savings program in the second quarter of 2026. The Transform to Outperform program delivered approximately $450 million of growth and productivity benefits during the first nine months of 2026, including roughly $250 million in the third quarter. DOW continues to expect roughly $700 million of transformation benefits in 2026.
Strong Financial Health Supports Capital Allocation
DOW has a strong balance sheet and generates substantial cash flows, which enable it to finance its growth investments in higher-value businesses and regions, and drive shareholder value. The company maintained approximately $14 billion of available liquidity at the end of the third quarter, has no substantive debt maturities until 2029. Dow reduced gross debt by approximately $600 million during the first nine months of 2026, including roughly $300 million in the third quarter. Management targets another $200 million of debt reduction in the fourth quarter.
DOW’s cash flow from operating activities for continuing operations reached $1.84 billion in the third quarter, up $709 million year over year and $515 million sequentially. The improvement reflected higher earnings and better working capital management. Free cash flow totaled $1.1 billion, while trailing 12-month cash flow conversion reached 84%. Dow also returned $253 million to shareholders through dividends in the third quarter.
Soft Demand and Cost Pressures Ail DOW
Dow remains exposed to weak and inconsistent demand across several regions and end markets. Packaging demand has remained resilient globally, while electronics and electric vehicle applications are supporting selected growth opportunities. However, elevated mortgage rates and housing affordability concerns continue to constrain demand in construction-related markets. In Europe, structurally high energy costs and weak building and construction activity continue to weigh on industry economics. Asia Pacific demand also remains mixed, with electronics strength partly offsetting weak Chinese property markets and softer consumer demand. Middle East disruptions continue to affect supply chains and regional shipments.
DOW expects normal seasonal weakness in building and construction and architectural coatings in the fourth quarter. These uneven demand trends could limit operating leverage and the benefits of pricing and productivity initiatives.
Dow also remains sensitive to energy and raw-material volatility. The Middle East conflict continues to disrupt trade flows and logistics, although near-term oil supply disruptions have eased from earlier levels. Elevated freight and transportation costs, along with volatile naphtha and ethane prices, create uncertainty around production economics. During the third quarter, higher raw-material and logistics costs partly offset gains from pricing and self-help initiatives. DOW expects energy costs in Europe to remain high during the winter months. Persistent volatility in energy, freight and regional supply chains remains a risk to sustained margin recovery.
Some better-ranked stocks in the Basic Materials space are Reliance, Inc. (RS - Free Report) , Element Solutions Inc. (ESI - Free Report) and Avino Silver & Gold Mines Ltd. (ASM - Free Report) .
The Zacks Consensus Estimate for RS’ 2026 earnings is pegged at $26.54 per share, indicating an 86.1% year-over-year surge. The consensus estimate for RS’ 2026 earnings has been revised 19.4% higher over the past 60 days.
The Zacks Consensus Estimate for ESI’s 2026 earnings is pegged at $1.85 per share, indicating a year-over-year rise of 24.2%. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 6%.
The Zacks Consensus Estimate for ASM’s current-year earnings has been stable over the past 60 days. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters. ASM has a trailing four-quarter earnings surprise of roughly 50%, on average.
View the Zacks #1 Rank List
Image: Bigstock
Here's Why You Should Hold DOW Stock in Your Portfolio for Now
Key Takeaways
Dow Inc. (DOW - Free Report) benefits from cost and productivity initiatives, growth actions in attractive markets, and an advantaged feedstock position amid a challenging macroeconomic backdrop.
The company’s shares have gained 38.8% over a year compared with the Zacks Chemicals Diversified industry’s 17.1% increase.
Image Source: Zacks Investment Research
Let’s find out why DOW stock is worth retaining at the moment.
DOW Gains on High-Return Growth Projects & Self-Help Actions
Dow is well positioned with its differentiated portfolio and advantaged feedstock positions in the Americas. It remains focused on investing in attractive areas. Its broad portfolio, significant low-cost feedstock positions, global footprint and market reach place it in an advantageous position against competitors. While Dow faces headwinds from heightened macroeconomic and geopolitical uncertainties, it remains focused on growth actions in attractive end markets and executing high-return incremental growth projects in cost-advantaged regions.
Recent alkoxylation investments are contributing to growth in the Industrial Solutions business. Demand for artificial intelligence (AI) infrastructure and energy applications supported Industrial Solutions volume growth in the third quarter of 2026.
Dow is also expanding specialty silicones capabilities for mobility, electronics and healthcare while increasing its emphasis on higher-value downstream applications. Engineered silicone materials expansions in China and Japan started up in the third quarter, while liquid silicone rubber expansions in the United States and China are scheduled for 2027.
Dow has completed the shutdown of its higher-cost Barry, U.K., upstream siloxanes unit, shifting its silicones mix by more than 25% toward more stable and higher-margin businesses while maintaining value-chain integration. The company also restarted its lowest-cost and most flexible European cracker in Terneuzen. The Alberta integrated ethylene complex Phase 1 start-up is targeted for 2029 and Phase 2 by year-end 2030, adding top-quartile capacity serving packaging applications.
Dow continues to emphasize cost and operational discipline through restructuring, productivity and process simplification. The company materially completed its $1 billion 2025 cost savings program in the second quarter of 2026. The Transform to Outperform program delivered approximately $450 million of growth and productivity benefits during the first nine months of 2026, including roughly $250 million in the third quarter. DOW continues to expect roughly $700 million of transformation benefits in 2026.
Strong Financial Health Supports Capital Allocation
DOW has a strong balance sheet and generates substantial cash flows, which enable it to finance its growth investments in higher-value businesses and regions, and drive shareholder value. The company maintained approximately $14 billion of available liquidity at the end of the third quarter, has no substantive debt maturities until 2029. Dow reduced gross debt by approximately $600 million during the first nine months of 2026, including roughly $300 million in the third quarter. Management targets another $200 million of debt reduction in the fourth quarter.
DOW’s cash flow from operating activities for continuing operations reached $1.84 billion in the third quarter, up $709 million year over year and $515 million sequentially. The improvement reflected higher earnings and better working capital management. Free cash flow totaled $1.1 billion, while trailing 12-month cash flow conversion reached 84%. Dow also returned $253 million to shareholders through dividends in the third quarter.
Soft Demand and Cost Pressures Ail DOW
Dow remains exposed to weak and inconsistent demand across several regions and end markets. Packaging demand has remained resilient globally, while electronics and electric vehicle applications are supporting selected growth opportunities. However, elevated mortgage rates and housing affordability concerns continue to constrain demand in construction-related markets. In Europe, structurally high energy costs and weak building and construction activity continue to weigh on industry economics. Asia Pacific demand also remains mixed, with electronics strength partly offsetting weak Chinese property markets and softer consumer demand. Middle East disruptions continue to affect supply chains and regional shipments.
DOW expects normal seasonal weakness in building and construction and architectural coatings in the fourth quarter. These uneven demand trends could limit operating leverage and the benefits of pricing and productivity initiatives.
Dow also remains sensitive to energy and raw-material volatility. The Middle East conflict continues to disrupt trade flows and logistics, although near-term oil supply disruptions have eased from earlier levels. Elevated freight and transportation costs, along with volatile naphtha and ethane prices, create uncertainty around production economics. During the third quarter, higher raw-material and logistics costs partly offset gains from pricing and self-help initiatives. DOW expects energy costs in Europe to remain high during the winter months. Persistent volatility in energy, freight and regional supply chains remains a risk to sustained margin recovery.
Dow Inc. Price and Consensus
Dow Inc. price-consensus-chart | Dow Inc. Quote
DOW’s Zacks Rank & Other Key Picks
DOW currently carries a Zacks Rank #3 (Hold).
Some better-ranked stocks in the Basic Materials space are Reliance, Inc. (RS - Free Report) , Element Solutions Inc. (ESI - Free Report) and Avino Silver & Gold Mines Ltd. (ASM - Free Report) .
RS currently sports a Zacks Rank #1 (Strong Buy), while ESI and ASM carry a Zacks Rank #2 (Buy), each. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for RS’ 2026 earnings is pegged at $26.54 per share, indicating an 86.1% year-over-year surge. The consensus estimate for RS’ 2026 earnings has been revised 19.4% higher over the past 60 days.
The Zacks Consensus Estimate for ESI’s 2026 earnings is pegged at $1.85 per share, indicating a year-over-year rise of 24.2%. Its earnings beat the Zacks Consensus Estimate in each of the trailing four quarters, with the average surprise being 6%.
The Zacks Consensus Estimate for ASM’s current-year earnings has been stable over the past 60 days. Its earnings beat the Zacks Consensus Estimate in three of the trailing four quarters. ASM has a trailing four-quarter earnings surprise of roughly 50%, on average.