Key points:
- The Dow Inc stock price barely moved after its profits surged 58%.
- Investors were largely unaware of the firm’s impressive Q1 results.
- Nevertheless, the chemicals firm’s prospects are pretty promising.
The Dow Inc (NYSE: DOW) share price barely moved despite the chemicals manufacturer announcing its Q1 2022 profits had soared 58%.
The chemicals company revealed that the higher prices fueled the higher profits in a market with constrained supply and high demand for its chemical products.
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Dow generated revenues worth $15.26 billion, beating analysts' consensus estimates of $14.54 billion. In addition, the firm’s earnings per share (EPS) came in at $2.34, beating expectations set at $2.05.
Investors were largely unaware of the massive improvements reported by the company primarily because it is a large company in an industry that attracts little attention from most investors who are chasing high-flying tech and growth stocks.
However, I expect investor interest in the company to rise significantly as news of its impressive performance spreads among market participants reigniting the shift towards value stocks by investors witnessed since the beginning of the year.
Dow Inc has benefitted significantly from the resumption of economic activities in the United States after the relaxing most of the lockdown restrictions that had hampered business growth in the past two years.
The company also revealed plans to expand its global alkoxylation capacity within Europe and the U.S. to meet rising demand across multiple markets globally. The chemical is used in the home and personal care segments and the industrial and institutional cleaning segments.
Investors were happy to hear that the investments in the two continents were backed by supply contracts signed with various clients, including leading consumer products companies. The facilities being built are expected to become operational in 2024 and 2025.
The investments being made by Dow Inc are set to increase its global production capacity by 70% starting from 2020, making it a leading player in the global chemicals industry. The projects will generate over $150 million in EBITDA by 2025.
Dow’s Louisiana and Spain alkoxylation facilities announced in 2018 and 2019 are scheduled to start production this year.
Jim Fitterling, Dow Inc’s CEO, said: “Despite higher energy costs, we captured healthy end-market demand and achieved solid volume growth, price gains and margin expansion. Looking ahead, we see strong demand across our end-markets,”
Adding:
“While the geopolitical environment remains dynamic, our global scale, cost-advantaged positions, and industry-leading feedstock and derivative flexibility continue to enable resilient financial and operating performance. At the same time, we are advancing our strategy to decarbonize and grow underlying earnings by more than $3 billion in the transition to a more sustainable world.”
Dow Inc is now in its 125th year of existence and managed to grow its top-line and bottom-line results during Q1 2022. Dow shares were trading up 2.16% at writing.