Shares of Dow Inc. (DOW) have surged by 17.6% in the past six months, outperforming the industry’s rise of 0.9% during the same period. Let’s delve into the key drivers behind this remarkable ascent of the Zacks Rank #3 (Hold) stock.
Shall We?
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What’s Contributing to DOW’s Success?
Dow remains steadfast in upholding cost and operational discipline, focusing on optimizing labor and service costs, reducing turnaround spending, and enhancing productivity. Its concerted efforts yielded $1 billion in cost savings for full-year 2023. Additionally, the company foresees digital investments paving the way for enhanced efficiency, aiming to achieve a $300 million EBITDA run rate by 2025.
The company is strategically investing in high-return growth projects, such as expanding downstream silicones capacity, to bolster its presence in lucrative markets.
Dow’s judicious and balanced capital allocation approach is bolstering its Decarbonize and Grow strategy, aimed at delivering enduring value for its stakeholders. By advancing its Decarbonize and Grow and Transform the Waste strategies, Dow expects to secure over $3 billion in underlying earnings annually by 2030.
In November 2023, Dow’s Board greenlit the Fort Saskatchewan Path2Zero initiative, a monumental step toward constructing the world’s premier net-zero Scope 1 and 2 emissions-integrated ethylene cracker and derivatives facility in Alberta, Canada. This initiative is poised to generate $1 billion in annual EBITDA growth across the economic cycle and decarbonize 20% of Dow’s global ethylene capacity. The venture positions Dow favorably to cater to the burgeoning demand in key markets like packaging, infrastructure, and hygiene.
Furthermore, the company is committed to enhancing shareholder value by leveraging robust cash flows. Having generated $5.2 billion in cash flow from operating activities in 2023, Dow allocated $2.6 billion to dividends and share buybacks during the same year. With a healthy liquidity reserve of around $13 billion and no significant debt maturing until 2027, Dow stands on solid financial ground.
Dow Inc. Price and Consensus
Dow Inc. price-consensus-chart | Dow Inc. Quote
Promising Stocks to Explore
For investors eyeing the basic materials sector, some noteworthy options include Denison Mines Corp. (DNN), Carpenter Technology Corporation (CRS), and Innospec Inc. (IOSP).
Denison Mines has outpaced the Zacks Consensus Estimate in the last four quarters, boasting an average earnings surprise of 300%. With its shares soaring approximately 95% over the past year, DNN holds a Zacks Rank #1 (Strong Buy).
On the other hand, Carpenter Technology is projected to witness a staggering year-over-year surge of 245.6% in its current fiscal year’s earnings, with the Zacks Consensus Estimate standing at $3.94. CRS has outshined the Zacks Consensus Estimate in three of the last four quarters, with an average earnings surprise of 12.2%. Notably, CRS’s shares have surged by around 84% in the past year, earning it a Zacks Rank #2 (Buy).
As for Innospec, the consensus estimate for its current-year earnings points to a 10.3% year-over-year uptick to $6.72 per share. Carrying a Zacks Rank #2, IOSP has surpassed the consensus estimate in each of the last four quarters, boasting an average earnings surprise of 10.5%. With its shares up by approximately 18% in the past year, Innospec presents a compelling investment opportunity.
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
