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Dow's (DOW) Stock Rises 10% in 3 Months: What's Driving It?

Zacks Equity Research

Dow Inc.’s DOW shares are up 10.2% over the past three months. The material science company has also outperformed its industry’s rise of 1.2% to over the same time frame.

Dow, a Zacks Rank #3 (Hold) stock, has a market cap of roughly $39 billion and average volume of shares traded in the last three months was around 3.900.7K.


 

Let’s delve deeper into the factors behind the stock’s price appreciation.

Driving Factors

Forecast-topping earnings performance in the third quarter and upbeat prospects have contributed to the gain in Dow’s shares. Dow’s third-quarter earnings of 91 cents per share trounced the Zacks Consensus Estimate of 72 cents. The company gained from its actions to reduce costs in the quarter.

Dow, in its third-quarter call, said that it will remain focused on investing in higher-return growth projects, achieving its stranded cost removal target and leveraging its feedstock flexibility in the prevailing market environment.

Estimates for Dow for 2019 have moved up over the past two months, reflecting analysts’ confidence on the stock. Over this period, the Zacks Consensus Estimate for 2019 has increased by 6.6%.

The company is gaining from cost synergy savings and productivity actions. It focuses on maintaining cost and operational discipline through cost synergy as well as stranded cost-removal initiatives. Dow completed its roughly $1.37 billion cost synergy program and removed $40 million of stranded costs in the third quarter. It also expects $65-$75 million in cost removal in the fourth quarter. The company remains on track to deliver around $700 million of synergy and stranded cost savings in 2019.

Moreover, Dow remains committed to invest 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 has already completed 14 of the 18 downstream capacity expansion projects that it plans to execute this year.

The company is also committed to return value to its shareholders by leveraging healthy cash flows. Dow generated strong operating cash flows from continuing operations of $1.8 billion in the third quarter, up from $203 million in the comparable quarter a year ago. It returned $600 million ($500 million in dividend and $100 million in share buybacks) to its shareholders in the quarter. The company is on track with its goal of $500 million worth share repurchases this year.

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Dow Inc. Price and Consensus

 

Dow Inc. Price and Consensus
Dow Inc. Price and Consensus

Dow Inc. price-consensus-chart | Dow Inc. Quote

 

Stocks to Consider

Some better-ranked stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. KL, Agnico Eagle Mines Limited AEM and Franco-Nevada Corporation FNV.

Kirkland Lake Gold has projected earnings growth of 97.1% for the current year and sports a Zacks Rank #1 (Strong Buy). The company’s shares have surged around 69% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.

Agnico Eagle has a projected earnings growth rate of 167.9% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have rallied roughly 52% in a year’s time.

Franco-Nevada has estimated earnings growth rate of 45.3% for the current year and carries a Zacks Rank #2. The company’s shares have shot up roughly 35% in a year’s time.

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Dow Inc. (DOW) : Free Stock Analysis Report
 
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