Dow (DOW) Q4 Earnings and Sales Top on Higher Local Prices

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Zacks Equity Research

Thu, Jan 27, 2022, 7:34 AM 5 min read

Dow Inc. DOW logged a profit (on a reported basis) of $1,736 million or $2.32 per share in fourth-quarter 2021, up from a profit of $1,236 million or $1.65 per share a year ago.

Barring one-time items, adjusted earnings were $2.15 per share for the reported quarter, topping the Zacks Consensus Estimate of $2.04.

Dow recorded net sales of $14,364 million for the quarter, up roughly 34% year over year. It also surpassed the Zacks Consensus Estimate of $14,325.4 million. Sales rose on the back of higher local pricing in all operating segments, businesses and regions. Dow saw a 39% year-over-year increase in local prices in the reported quarter. Prices also rose 1% on a sequential comparison basis.

Volumes fell 4% year over year, hurt by supply and global logistics constraints. Supply constraints resulted from maintenance and continued impacts of the pandemic and weather-related outages. The company also faced headwinds from higher raw material and energy costs. However, it benefited from demand strength and operating discipline in the quarter.

Dow Inc. Price, Consensus and EPS Surprise

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

Segment Highlights

Packaging & Specialty Plastics: The division’s sales climbed 40% year over year to $7.2 billion in the reported quarter on higher local prices. Volumes went down 3% as gains in energy volume were more than offset by reduced polyethylene volumes. Local prices jumped 44%. Currency decreased sales by 1%.

Industrial Intermediates & Infrastructure: Sales for the unit went up 30% year over year to $4.5 billion. Local prices climbed 38% on strong industry demand. Volumes fell 7%, hurt by the transition of a low-margin coproducer contract and maintenance turnaround activities.

Performance Materials & Coatings: Revenues from the division went up 26% year over year to $2.6 billion. Volumes slipped 4% while local price rose 30%. Volumes fell as higher demand for performance silicones applications and architectural coatings in the United States and Canada was more than offset by reduced siloxane supply availability.

FY21 Results

Earnings for full-year 2021 were $8.38 per share compared with earnings of $1.64 per share a year ago. Net sales shot up 43% year over year to $54,968 million.

Financials

Dow had cash and cash equivalents of $2,988 million at the end of 2021, down around 41% year over year. Long-term debt was $14,280 million, down around 13% year over year.

Cash provided by operating activities from continuing operations was $2.6 billion in the reported quarter while free cash flow was $2.1 billion.

Dow also returned $912 million to shareholders in the quarter through dividends and share buybacks.

Outlook

Moving ahead, the company said that it expects demand strength across its end markets to continue in 2022, aided by rising industrial production and sustained consumer spending. Dow also expects logistics issues to ease throughout this year to fulfill elevated order backlogs and pent-up customer demand. It will remain committed to make progress on its higher-return, lower-risk growth projects and efficiency programs, as well as advance its key sustainability actions to decarbonize its assets and capture higher demand for lower carbon and circular solutions, the company noted.

Price Performance

Dow’s shares have gained 5.2% over a year compared with a 8.3% rise recorded by the industry.

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Zacks Rank & Other Key Picks

Dow currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space include Commercial Metals Company CMC, Albemarle Corporation ALB and AdvanSix Inc. ASIX.

Commercial Metals, sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 62% for the current fiscal year. The Zacks Consensus Estimate for CMC's current fiscal year earnings has been revised 39.5% upward over the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.

Commercial Metals beat the Zacks Consensus Estimate for earnings in three of the last four quarters while missed once. It has a trailing four-quarter earnings surprise of roughly 13.1%, on average. CMC has rallied around 63% in a year.

Albemarle, carrying a Zacks Rank #1, has an expected earnings growth rate of 51.3% for the current year. ALB's consensus estimate for the current year has been revised 5.4% upward over the past 60 days.

Albemarle beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 22.1%. ALB shares have gained around 22% in a year.

AdvanSix, carrying a Zacks Rank #1, has an expected earnings growth rate of 7.4% for the current year. The Zacks Consensus Estimate for ASIX’s current-year earnings has been revised 5.3% upward in the past 60 days.

AdvanSix beat the Zacks Consensus Estimate for earnings in each of the trailing four quarters, the average being 46.9%. ASIX has rallied around 87% in a year.