It has been about a month since the last earnings report for Dow Inc. (DOW). Shares have added about 9.1% in that time frame, outperforming the S&P 500.
Will the recent positive trend continue leading up to its next earnings release, or is Dow Inc. due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at the most recent earnings report in order to get a better handle on the important drivers.
Dow Tops Q4 Earnings, Sales on Higher Volumes and Prices
Dow logged earnings (on a reported basis) of $1.65 per share for fourth-quarter 2020 against a loss of $3.14 per share a year ago.
Barring one-time items, adjusted earnings were 81 cents per share for the reported quarter, topping the Zacks Consensus Estimate of 69 cents.
Dow raked in net sales of $10,706 million for the quarter, up roughly 5% year over year. It also surpassed the Zacks Consensus Estimate of $9,896.7 million. Sales rose due to higher local pricing and volumes. Dow saw a 2% year-over-year increase in local prices in the reported quarter. Prices also rose 8% on a sequential comparison basis on gains across all segments.
Volumes edged up 1% year over year in the quarter, driven by higher demand in Packaging & Specialty Plastics and Performance Materials & Coatings segments. The company saw higher volumes in every region and segment on a year-over-year basis driven by its consumer-led portfolio and focus on capturing demand.
Packaging & Specialty Plastics: The division’s sales went up 6% year over year to $5.1 billion in the reported quarter on higher volumes and prices, and favorable currency impact. Volumes rose 2% on olefin end-market demand while local prices went up 2%. Currency increased sales by 2%.
Industrial Intermediates & Infrastructure: Sales for the unit increased 8% year over year to $3.5 billion. Volumes were steady as growth from strong construction and durable goods demand was offset by pressure from supply limitations. Local prices rose 6% on the back of significant increases in consumer goods and appliances. Currency increased sales by 2%.
Performance Materials & Coatings: Revenues from the division were flat year over year at $2 billion. Volumes rose 2% while local price declined 3%. Currency increased sales by 1%. Volumes were driven by growth in do-it-yourself architectural coatings and home care.
Earnings (as reported) for full-year 2020 were $1.64 per share, compared with a loss of $1.84 per share a year ago. Net sales dropped around 10% year over year to $38,542 million.
Dow had cash and cash equivalents of $5,104 million at the end of 2020. Long-term debt was $16,491 million.
Cash provided by operating activities from continuing operations was $1.7 billion in the reported quarter while free cash flow was $1.4 billion. Free cash flow for full-year 2020 was $5 billion.
Dow also returned $519 million to shareholders in the fourth quarter through dividends. It also achieved a total net debt improvement in excess of $2.6 billion in 2020.
Moving ahead, Dow noted that it entered the new year with momentum on a sequential comparison basis and is well-placed for sustained profitable growth amid the ongoing economic recovery. The company expects rising margins as differentiated parts of its portfolio witness improving demand on market recovery. Dow also expects to deliver significant value through innovation and operational efficiencies. Moreover, the company is benefiting from improving cost structure, financial flexibility and its low-cost operating model.
How Have Estimates Been Moving Since Then?
It turns out, fresh estimates have trended upward during the past month. The consensus estimate has shifted 29.26% due to these changes.
At this time, Dow Inc. has a nice Growth Score of B, however its Momentum Score is doing a bit better with an A. Following the exact same course, the stock was allocated a grade of A on the value side, putting it in the top 20% for this investment strategy.
Overall, the stock has an aggregate VGM Score of A. If you aren't focused on one strategy, this score is the one you should be interested in.
Estimates have been trending upward for the stock, and the magnitude of this revision looks promising. It comes with little surprise Dow Inc. has a Zacks Rank #2 (Buy). We expect an above average return from the stock in the next few months.
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