BMO Capital Markets has adjusted its price target for Dow Inc. (NYSE: NYSE:DOW), a major player in the chemical industry, reducing it to $57.00 from the previous $60.00 while maintaining its Market Perform rating on the stock.
The adjustment, which came on Friday, follows Dow Inc.'s second-quarter results, which slightly missed expectations. The company's guidance for the upcoming quarter suggests flat results compared to the previous quarter, which was not as optimistic as many analysts had anticipated, leading to a slight decline in the stock's value.
BMO Capital's analyst pointed out that while the third-quarter guidance appears to be a low hurdle and potentially easy to surpass, especially considering North American Polyethylene trends, there are still concerns.
Specifically, the forecast of softer-than-expected free cash flow (FCF) and the possibility of net cash outflows extending not just through 2024 but possibly into 2025 has raised some caution among investors, the analyst noted.
Recently, Piper Sandler adjusted Dow's price target to $64, maintaining an overweight rating after a reduction in the EBITDA forecast for 2025 to $7.1 billion, influenced by a macroeconomic outlook that anticipates slower growth, particularly in the European Union and China. Yet, Piper Sandler's 2025 EBITDA estimate remains more than 19% higher than its 2024 projection, indicating ongoing confidence in Dow Inc.'s performance.
RBC Capital also revised Dow Inc.'s price target, reducing it from $62 to $57, while maintaining a Sector Perform rating. This adjustment reflects lowered earnings estimates for the third quarter and the fiscal years 2024 and 2025.
Dow Inc.'s second-quarter earnings showed a 4% year-over-year decrease in net sales, amounting to $10.9 billion. However, the company also reported a sequential 1% increase in sales and volume. Operating EBIT rose to $819 million, marking a $145 million gain from the previous quarter. Dow's cash flow generation strategy resulted in $832 million from operations, enabling a significant $691 million return to shareholders.
InvestingPro Insights
As investors digest the revised price target from BMO Capital Markets for Dow Inc. (NYSE: DOW), it's worth considering additional metrics and insights. Dow Inc. has a current market capitalization of approximately $37.04 billion, and despite a revenue decline over the last twelve months as of Q2 2024, it still boasts significant revenue of $43.03 billion. The company's P/E ratio stands at 32.61, which is adjusted to 25.59 when considering the last twelve months leading up to Q2 2024. This suggests a valuation that may be on the higher side, especially when compared to industry peers.
An InvestingPro Tip notes that management has been aggressively buying back shares, which could be a sign of confidence from the company's leadership in its future prospects. Additionally, while analysts have revised their earnings downwards for the upcoming period, the dividend yield as of the latest data is quite attractive at 5.3%, which may appeal to income-focused investors. Furthermore, the stock is known to exhibit low price volatility, which might provide some stability in a portfolio.
For those looking for a deeper dive into Dow Inc.'s financial performance and future outlook, InvestingPro offers a range of additional tips. Currently, there are 9 more InvestingPro Tips available, which can be accessed for further analysis. Interested readers can take advantage of these insights and more with an exclusive offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription at Investing.com.
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