Dow (DOW) Stocks Surge 18% in Half a Year: What’s Behind the Rally?
Dow (DOW) is reaping the rewards of cost-saving measures and strategic investments in high-yield growth ventures.
The shares of Dow Inc. (DOW) have seen an impressive 17.6% uptick in the last six months. This surge surpasses the modest 0.9% growth observed in its industry during the same period.
Let’s delve into the driving forces behind this Zacks Rank #3 (Hold) stock.
What’s Contributing to DOW’s Momentum?
Dow remains steadfast in its commitment to cost efficiency and operational excellence. It is executing targeted strategies aimed at optimizing labor and service costs, reducing turnaround expenditures, and enhancing productivity. These initiatives have resulted in $1 billion in cost savings for the full fiscal year of 2023. Additionally, Dow anticipates that its investments in digital innovations will enhance efficiency, with an expected $300 million EBITDA run rate by 2025.
Moreover, the company is strategically investing in promising ventures, particularly those with high-return potential. One such investment is the expansion of downstream silicone capacity.
Dow’s disciplined approach to capital allocation is bolstering its Decarbonize and Grow strategy, which aims to generate sustainable long-term value for its stakeholders. The company is actively pursuing strategies to decarbonize its operations and transform waste, with anticipated annual underlying earnings exceeding $3 billion by 2030.
In November 2023, the company received approval from its Board for its Fort Saskatchewan Path2Zero initiative, a significant step towards its goal of establishing the world’s first net-zero Scope 1 and 2 emissions-integrated ethylene cracker and derivatives facility in Alberta, Canada. This project is projected to generate $1 billion in EBITDA growth annually and decarbonize 20% of Dow’s global ethylene capacity. Additionally, it positions Dow to meet rising demand in key markets such as packaging, infrastructure, and hygiene, while also capitalizing on the commercialization of low and zero-emission products.
Furthermore, Dow is dedicated to delivering value to its shareholders through prudent financial management. In 2023, DOW generated robust operating cash flows of $5.2 billion and returned $2.6 billion to shareholders through dividends and share repurchases. With approximately $13 billion in liquidity and no significant debt maturities until 2027, Dow is well-positioned to navigate future opportunities and challenges.
Stocks Worth Considering
In addition to Dow, other promising stocks in the basic materials sector include Denison Mines Corp. (DNN), Carpenter Technology Corporation (CRS), and Innospec Inc. (IOSP).
Denison Mines has consistently exceeded the Zacks Consensus Estimate in the past four quarters, with an average earnings surprise of 300%. The company’s shares have surged approximately 95% in the last year, earning it a Zacks Rank #1 (Strong Buy).
Carpenter Technology is expected to witness a remarkable year-over-year earnings surge of 245.6%, with the consensus estimate for the current fiscal year standing at $3.94 per share. CRS has outperformed earnings expectations in three out of the last four quarters and maintained par once, with an average earnings surprise of 12.2%. The company’s shares have appreciated by around 84% in the past year, earning it a Zacks Rank #2 (Buy).
Innospec anticipates a 10.3% year-over-year increase in current-year earnings, with a consensus estimate of $6.72 per share. IOSP, holding a Zacks Rank #2, has surpassed the consensus estimate in each of the last four quarters, with an average earnings surprise of 10.5%. The company’s shares have grown by approximately 18% in the past year.