Dow (DOW) Stock Up 59% in 6 Months: What's Behind the Rally?
Dow Inc.’s DOW shares have popped 59.3% over the past six months. The company has also outperformed its industry’s rise of 50.1% over the same time frame.
Dow has a market cap of roughly $34.5 billion and average volume of shares traded in the last three months is around 4,312.8K. The company has an expected long-term earnings per share growth rate of 5%.
Let’s take a look into the factors that are driving this Zacks Rank #1 (Strong Buy) stock.
What’s Favoring the Stock?
Dow is benefiting from cost synergy savings and productivity initiatives and its investment in high-return projects. The company focuses on maintaining cost and operational discipline through cost synergy as well as stranded cost-removal initiatives. It delivered more than $600 million in cost synergy and stranded costs savings in 2019. It expects to complete its stranded costs removal target in 2020 and capture around $140 million of savings.
Moreover, Dow is taking actions to cut operating expenses by $500 million through additional structural cost actions, which is expected to lend support to its earnings in 2020. The company also expects to realize more than $300 million annualized EBITDA benefit by the end of next year from a restructuring program being initiated in the third quarter of 2020. This includes a 6% reduction in its global workforce and actions to exit uncompetitive assets.
The company also 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. Dow completed 16 silicones incremental expansion projects last year, which provided additional downstream capability.
Dow is also benefiting from higher demand for its materials across healthcare and packaging markets, thanks to the coronavirus pandemic. The outbreak has led to a surge in demand for health, hygiene and safety products.
Moreover, Dow remains committed to return value to its shareholders by leveraging strong cash flows. It generated operating cash flows from continuing operations of $1.6 billion in the second quarter of 2020. It also generated free cash flow of $1.3 billion in the quarter. The company returned $516 million in dividends to its shareholders in the second quarter. Dow is also taking actions to further strengthen its financial position.
Earnings estimate revisions also have the greatest impact on stock prices. Over the past month, the Zacks Consensus Estimate for Dow for the current year has increased 32%. The consensus estimate for 2021 has also been revised 10.4% upward over the same time frame.
Dow Inc. Price and Consensus
Dow Inc. price-consensus-chart | Dow Inc. Quote
Stocks to Consider
Other top-ranked stocks worth considering in the basic materials space include AngloGold Ashanti Limited AU, Barrick Gold Corporation GOLD and Yamana Gold Inc. AUY.
AngloGold Ashanti has a projected earnings growth rate of 124.2% for the current year. The company’s shares have gained roughly 39% in a year. It currently sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold has a projected earnings growth rate of 80.4% for the current year. The company’s shares have rallied around 64% in a year. It currently has a Zacks Rank #1.
Yamana Gold has an expected earnings growth rate of 84.6% for the current year. The company’s shares have surged around 74% in the past year. It currently carries a Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $24 billion in global revenues. By 2020, it's predicted to blast through the roof to $77.6 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
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