Will Dow report earnings beat yet again in Q2 despite weaker margins?

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Dow (NYSE:DOW) is scheduled to announce Q2 earnings results on Thursday, Jul. 21, before market open.

Consensus EPS estimate is $2.13 (-21.7% Y/Y) and consensus revenue estimate is $15.54B (+11.9% Y/Y).

Over the last 2 years, DOW has beaten EPS estimates 88% of the time and revenue estimates 100% of the time.

Over the last 3 months, EPS estimates have seen 12 upward revisions and 3 downward. Revenue estimates have seen 9 upward revisions.

Citi downgraded DOW to Neutral due to “slower economic activity and weaker expectations for integrated ethylene margins”.

Credit Suisse downgraded DOW to Underperform on concerns that U.S. basic chemical producers are “overearning, just as there appears to be a consumer shift away from goods to services”.

Piper Sandler downgraded DOW to Neutral on price and volume weakness. Higher natural gas costs, logistics challenges and rising stockpiles also threaten to hit near-term profitability.

Wall Street analysts on average rated DOW Hold. But SA Quant’s rating on DOW is Strong Buy, while SA Authors rated DOW Buy.

SA contributor Steven Cress in a very bullish analysis said DOW has excellent fundamentals, good profitability and strong dividend safety grades.

Q1 recap:

  • Shares of DOW gained after Q1 adj. earnings and revenues topped estimates as volume growth, price gains and margin expansion helped offset higher energy costs.
  • After the earnings report, Citi upgraded DOW to Buy, saying its strong Q1 amid rapid inflation indicates strength for commodity chemicals. Fermium Research praised DOW’s “aggressiveness” in returning cash to shareholders.
  • RBC said margin contraction will likely continue into Q2 and H2 due to normalizing supply chain and moderation in feedstock costs.

DOW stock, which declined 7.8% YTD, underperformed the S&P 500 index in the last 1 year.