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How Will Dow Chemical (DOW) Stock React To Sale of Two Subsidiaries?

Stocks in this article: DOW

NEW YORK (TheStreet) -- Dow Chemical Co.  (DOW) stock is up 1% to $53.63 this afternoon as the company plans to sell two of its subsidiaries in a $2 billion deal as it looks to divest several billion dollars of non-core assets by 2015, Reuters reports.

Dow Chemical hired investment bankers, including Morgan Stanley  (MS)  , to sell its Angus Chemical Co. and AgroFresh Inc subsidiaries, Reuters noted.

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Separately, TheStreet Ratings team rates DOW CHEMICAL as a Buy with a ratings score of A+. TheStreet Ratings Team has this to say about their recommendation:

"We rate DOW CHEMICAL (DOW) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its solid stock price performance, revenue growth, largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels and notable return on equity. We feel these strengths outweigh the fact that the company has had sub par growth in net income."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Compared to its closing price of one year ago, DOW's share price has jumped by 42.89%, exceeding the performance of the broader market during that same time frame. Regarding the stock's future course, although almost any stock can fall in a broad market decline, DOW should continue to move higher despite the fact that it has already enjoyed a very nice gain in the past year.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 7.8%. Since the same quarter one year prior, revenues slightly increased by 2.3%. This growth in revenue does not appear to have trickled down to the company's bottom line, displayed by a decline in earnings per share.
  • The debt-to-equity ratio is somewhat low, currently at 0.67, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.20, which illustrates the ability to avoid short-term cash problems.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. In comparison to the other companies in the Chemicals industry and the overall market, DOW CHEMICAL's return on equity is significantly below that of the industry average and is below that of the S&P 500.
  • You can view the full analysis from the report here: DOW Ratings Report

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