On Friday, Mizuho set a new stock price target for Dow Inc. (NYSE: NYSE:DOW), increasing it to $56.00 from the previous $55.00, while keeping a Neutral rating on the stock. The adjustment follows Dow's adjusted EBITDA guidance for the fourth quarter of 2024, which was set at approximately $1.31 billion. This figure is slightly below the market expectations of $1.35 billion to $1.38 billion, as estimated by Morgan Stanley USA and Bloomberg consensus.
Dow reported an adjusted EBITDA of $1.38 billion for the third quarter of 2024, which aligns with the revised September guidance that had been lowered to around $1.31 billion, in line with Morgan Stanley USA and Bloomberg consensus estimates.
Notably, global volumes, excluding hydrocarbons and energy, saw a year-over-year increase of 2%. When including hydrocarbons and energy, volume growth reached 3% in both the United States/Canada and EMEA regions. However, this was counterbalanced by a 6% decline in the Asia Pacific and a 2% decrease in Latin America.
The chemical giant also reported that global demand continues to be inconsistent, with key regions such as China and Europe not experiencing any significant recovery. In addition to its financial updates, Dow announced that it is conducting a strategic review of its Polyurethanes assets in Europe, signaling potential changes in its operations and portfolio in the region. The outcome of this review has yet to be disclosed.
In other recent news, Dow Inc. has seen adjustments in its stock outlook by investment firm Jefferies, which revised the price target to $53.00 from $55.00 while maintaining a Hold rating. This follows Dow's third-quarter earnings per share (EPS) of $0.47, surpassing Jefferies' estimate by $0.09 and the consensus by $0.01.
Jefferies projects Dow's fourth-quarter earnings before interest, taxes, depreciation, and amortization (EBITDA) to be approximately $1.3 billion, slightly below the consensus estimate of $1.36 billion.
In recent developments, Dow reported a 1% year-over-year increase in net sales for the third quarter of 2024, amounting to $10.9 billion, primarily due to stronger demand in the U.S. and Canada. However, cash flow from operations decreased to $800 million, largely due to an increase in inventories. Dow has also entered a long-term hydrogen supply agreement and acquired Circulus to boost its recycled capacity.
The company is conducting a strategic review of its European polyurethane assets, with results expected by mid-2025. Despite facing challenges such as high energy costs and slower demand affecting European margins, Dow aims to achieve over $3 billion in additional annual earnings by 2030, backed by strategic asset management and investments.
InvestingPro Insights
Dow Inc.'s recent financial guidance and strategic moves align with several key insights from InvestingPro. Despite the slight miss in Q4 2024 EBITDA guidance compared to market expectations, InvestingPro Tips highlight that Dow's net income is expected to grow this year. This projection suggests potential for improved financial performance, which could support the stock's valuation in the long term.
The company's position as a prominent player in the Chemicals industry, as noted by InvestingPro, underscores its resilience in the face of inconsistent global demand mentioned in the article. Moreover, Dow's significant dividend yield of 5.49% (as per InvestingPro Data) may attract income-focused investors, especially given that the stock is trading near its 52-week low.
Investors should note that while Dow faces challenges such as weak gross profit margins (11.17% for the last twelve months as of Q3 2024), the company's management has been aggressively buying back shares, potentially indicating confidence in the company's future prospects. These insights, along with 7 additional InvestingPro Tips, provide a more comprehensive view of Dow's financial health and market position.
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