Why Dow Chemical (DOW) Stock Is Up Today

NEW YORK (TheStreet) -- Dow Chemical  (DOW) rose Wednesday after the company reported a 75% increase in profit in its first-quarter earnings report thanks to higher plastics prices and higher margins.

The largest U.S. chemical maker's net income rose to $964 million, or 79 cents a share, from $550 million, or 46 cents a share, in the same period one year earlier. This beat the Capital IQ consensus estimate of 71 cents a share. Revenue increased 0.5% to $14.46 billion, which came up short of the consensus estimate of $14.72 billion.

Adjusted EBITDA margin expanded more than 60 basis points year over year to 16.6%.

The stock was up 1.2% to $49.53 at 11:45 a.m. on Wednesday.

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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 compelling growth in net income, revenue growth, largely solid financial position with reasonable debt levels by most measures, solid stock price performance and attractive valuation levels. We feel these strengths outweigh the fact that the company shows low profit margins."

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

  • The net income growth from the same quarter one year ago has significantly exceeded that of the S&P 500 and the Chemicals industry. The net income increased by 266.1% when compared to the same quarter one year prior, rising from -$631.00 million to $1,048.00 million.
  • Despite its growing revenue, the company underperformed as compared with the industry average of 12.7%. Since the same quarter one year prior, revenues slightly increased by 3.4%. Growth in the company's revenue appears to have helped boost the 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 1.30, which illustrates the ability to avoid short-term cash problems.
  • Powered by its strong earnings growth of 229.50% and other important driving factors, this stock has surged by 60.22% over the past year, outperforming the rise in the S&P 500 Index during the same period. Turning to the future, naturally, any stock can fall in a major bear market. However, in almost any other environment, the stock should continue to move higher despite the fact that it has already enjoyed nice gains in the past year.
  • You can view the full analysis from the report here: DOW Ratings Report

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Editor's Note: Any reference to TheStreet Ratings and its underlying recommendation does not reflect the opinion of TheStreet, Inc. or any of its contributors including Jim Cramer or Stephanie Link.

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