Dow Chemical Held at Neutral - Analyst Blog
02 Maggio 2013 - 7:30PM
Zacks
We are reaffirming our Neutral recommendation on Dow
Chemical (DOW) following its mixed first-quarter 2013
results. Its adjusted earnings for the quarter outperformed the
Zacks Consensus Estimate while revenues miss.
Why Neutral?
The U.S. chemical kingpin’s profit soared 33% in the first quarter
on strength in its agriculture business, buoyed by healthy demand
from farmers. The company registered record sales of seeds and crop
protection products. However, sales fell 2% in the quarter as gains
across agricultural sciences and electronic and functional
materials were masked by declines in other businesses.
Dow, which currently retains a short-term Zacks Rank #3 (Hold), is
benefiting from strong fundamentals in agriculture and food
markets. A string of innovative products in its pipeline adds to
its strength.
Moreover, Dow is seeing significant feedstock advantage in North
America. The company’s investments in the U.S. Gulf Coast and
Middle East are focused on boosting this advantage.
In addition, Dow remains focused on offering incremental returns to
its shareholders leveraging its healthy cash flows. It also
continues debt repayments having reduced its debt by over $900
million in the first quarter.
However, Dow continues to witness softness in the electronics and
construction end-markets. Moreover, Dow is facing challenges in
Western Europe due to the beleaguered economic conditions. It does
not see a material improvement in the macroeconomic environment
this year.
Moreover, Dow is exposed to significant pension headwinds. The
company expects pension costs to increase between $250 million and
$300 million in 2013.
Other Stocks to Consider
Other companies in the chemical industry that are worth considering
include Shin-Etsu Chemical Co., Ltd. (SHECY),
Celanese Corporation (CE) and Methanex
Corporation (MEOH). While Shin-Etsu Chemical retains a
Zacks Rank #1 (Strong Buy), both Celanese and Methanex hold a Zacks
Rank #2 (Buy).
CELANESE CP-A (CE): Free Stock Analysis Report
DOW CHEMICAL (DOW): Free Stock Analysis Report
METHANEX CORP (MEOH): Free Stock Analysis Report
SHIN-ETSU CHEM (SHECY): Get Free Report
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