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UBS maintains 'neutral' on Dow with $61 price target

EditorLina Guerrero
Published 05/16/2024, 02:04 PM
DOW
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On Thursday, UBS reaffirmed its Neutral stance on Dow Inc. (NYSE:DOW), maintaining a price target of $61.00. The chemical giant Dow is expected to reach a higher earnings corridor, with mid-cycle earnings potentially near approximately $9 billion in EBITDA, compared to the consensus estimates of roughly $6.3 billion and $7.5 billion for the years 2024 and 2025, respectively. Dow has several projects underway that are projected to contribute an additional $1.2 billion in incremental EBITDA by the middle of the decade. Furthermore, the company's net-zero Alberta cracker is anticipated to add around $1 billion by 2030.

Dow's strategy also includes a commitment to sustainability, with goals to reduce scope 1 and 2 emissions by about 30% by 2030, aiming for net zero by 2050. The company plans to decrease water usage and increase the shift towards circular plastics, with a target of over 3 million tons per year by 2030. These initiatives are part of a broader 'transform the waste' strategy that is expected to yield an additional $0.5 billion.

In addition to environmental goals, Dow is also focusing on increasing its low-cost feedstock mix to approximately 70%, up from the current 65%, and expanding product capacity by about 15%. While UBS acknowledges that Dow is making significant investments in the right areas, there is still uncertainty regarding the timing of the turn in the cycle for a number of Dow's product markets. The company's forward-looking strategy aims to position it strongly for future market conditions.

InvestingPro Insights

As Dow Inc. (NYSE:DOW) continues to navigate the competitive landscape of the chemicals industry, recent data and analysis from InvestingPro provide an insightful look into the company's financial health and market performance. With a market capitalization of $41.25 billion and a notable P/E ratio of 27.11 for the last twelve months as of Q1 2024, Dow is trading at a significant earnings multiple. This could suggest that investors have high expectations for the company's future earnings growth.

One of the key InvestingPro Tips highlights that management has been aggressively buying back shares, which could signal confidence in the company's future prospects. Additionally, while analysts have revised their earnings expectations downwards for the upcoming period, Dow is still expected to be profitable this year with a predicted net income growth. This aligns with UBS's outlook on Dow's potential to reach higher earnings with its strategic initiatives.

Investors may also find the dividend yield of 4.74% as of the last dividend ex-date on February 28, 2024, to be a compelling aspect of Dow's investment profile, particularly in an industry that suffers from weak gross profit margins like chemicals. With the stock trading near its 52-week high and a price percentage of 96.9% of that high, Dow's stability and profitability over the last twelve months are evident in its performance metrics.

For those looking to delve deeper into Dow's financials and future prospects, InvestingPro offers additional insights. Readers can use the coupon code PRONEWS24 to get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, providing access to a total of 10 InvestingPro Tips for Dow at https://www.investing.com/pro/DOW, which may further inform investment decisions.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.

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