Dow (DOW) Gears Up for Q2 Earnings: What's in the Cards?

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Dow Inc. DOW is scheduled to come up with second-quarter 2021 results before the opening bell on Jul 22. The company’s results are expected to reflect the benefits of cost-reduction initiatives and strong demand across a number of end markets. However, plant turnaround costs are likely to have affected its second-quarter performance.

The company surpassed the Zacks Consensus Estimate in each of the trailing four quarters, the average being 26.5%. It posted an earnings surprise of 23.6% in the last reported quarter.

Dow’s shares have rallied 41.9% over a year compared with a 33% rise recorded by the industry.

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Let’s see how things are shaping up for this announcement.

Zacks Model

Our proven model predicts an earnings beat for Dow this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earning beat.

Earnings ESP: Earnings ESP for Dow is +4.04%. The Zacks Consensus Estimate for earnings for the second quarter is currently pegged at $2.40. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: Dow currently carries a Zacks Rank #1.

What do the Estimates Say?

Dow expects revenues for the second quarter to be in the band of $12.4-$12.9 billion.

The Zacks Consensus Estimate for revenues for Dow is currently pegged at $12,660 million, suggesting a rise of 51.5% year over year.

Some Factors at Play

Dow is expected to have gained, in the second quarter, 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, higher demand across construction, mobility, electronics and consumer durables end-markets on continued economic recovery is likely to have supported its results. Higher prices are also expected to have boosted Dow’s top line in the quarter to be reported.

The company is also likely to have gained from cost synergy savings and productivity actions in the second quarter. It remains focused on maintaining cost and operational discipline. The company is currently executing a restructuring program being initiated in the third quarter of 2020. It expects to realize more than $300 million annualized EBITDA benefit from the program that is likely to be substantially complete by end-2021. Some benefits of these actions are likely to get reflected on the company’s bottom line in the second quarter.

However, the company is likely to have faced headwind from higher plant turnaround costs in the second quarter. It envisions an unfavorable impact of around $175 million in the quarter in its Packaging & Specialty Plastics unit related to U.S. Gulf Coast cracker maintenance activities. Moreover, headwinds from higher turnaround spending at U.S. Gulf Coast sites, mainly in polyurethane, is expected to be roughly $50 million in the Industrial Intermediates & Infrastructure segment. As such, turnaround costs are expected to have impacted margins in these segments in the second quarter.

Dow Inc. Price and EPS Surprise

Dow Inc. Price and EPS Surprise

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

Stocks That Warrant a Look

Here are some companies in the basic materials space you may want to consider as our model shows they too have the right combination of elements to post an earnings beat this quarter:

LyondellBasell Industries N.V. LYB, scheduled to release earnings on Jul 30, has an Earnings ESP of +2.38% and sports a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Cabot Corporation CBT, scheduled to release earnings on Aug 9, has an Earnings ESP of +14.81% and carries a Zacks Rank #1.

Nutrien Ltd. NTR, scheduled to release earnings on Aug 9, has an Earnings ESP of +0.57% and carries a Zacks Rank #1.

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Dow Inc. (DOW) : Free Stock Analysis Report

Cabot Corporation (CBT) : Free Stock Analysis Report

LyondellBasell Industries N.V. (LYB) : Free Stock Analysis Report

Nutrien Ltd. (NTR) : Free Stock Analysis Report

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