"The investment case for Dow Chemical is fundamentally a call on operating rates, a recovery in construction and auto-related end markets, successful pricing to offset raw materials, and effective use of cash for additional bolt-on M&A (Mergers & Acquisitions) and retiring debt," Jefferies analysts said.
Other catalysts for upside scenarios include that additional specialty chemical acquisitions would help reduce cyclicality, and securing LT access to U.S. ethane would help maintain petrochem margins in 2015 to 2025, Jefferies added.
Dow Chemical, based in Midland, MI, is a global manufacturer and supplier of products used primarily as raw materials in the manufacture of customer products and services.
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 increase in net income, largely solid financial position with reasonable debt levels by most measures, attractive valuation levels, good cash flow from operations and growth in earnings per share. We feel its strengths outweigh the fact that the company has had lackluster performance in the stock itself."
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 40.9% when compared to the same quarter one year prior, rising from $1,049.00 million to $1,478.00 million.
- The debt-to-equity ratio is somewhat low, currently at 0.89, 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 1.21, which illustrates the ability to avoid short-term cash problems.
- Net operating cash flow has significantly increased by 118.78% to $1,258.00 million when compared to the same quarter last year. In addition, DOW CHEMICAL has also vastly surpassed the industry average cash flow growth rate of 15.87%.
- DOW CHEMICAL has improved earnings per share by 49.4% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DOW CHEMICAL reported lower earnings of $2.86 versus $3.61 in the prior year. This year, the market expects an improvement in earnings ($3.00 versus $2.86).
- You can view the full analysis from the report here: DOW Ratings Report