On Friday, Mizuho Securities adjusted its financial outlook for Dow Inc. (NYSE: NYSE:DOW), a major player in the chemical industry, by increasing its price target for the company's stock to $62, up from a previous target of $55. The firm maintained a neutral stance on the stock.
The adjustment came following Dow's recent financial performance, where the company reported an adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) of $1.39 billion for the March 2024 quarter. This figure surpassed the estimates of $1.27 billion and $1.28 billion from Morgan Stanley USA and the consensus of Bloomberg analysts, respectively.
The company's guidance for the upcoming June 2024 quarter was also a factor, with an implied adjusted EBITDA of $1.59 billion, which is above the $1.47 billion and $1.56 billion expected by Morgan Stanley USA and the Bloomberg consensus.
Mizuho's analyst highlighted Dow's operational strategy, noting the company's use of more natural gas-based feedstocks as a result of the U.S. natural gas advantage over Brent crude oil. This shift allowed Dow to run operations that reduced the production of low-margin co-products.
Additionally, when excluding these co-products and related items, Dow's global volume saw a year-over-year increase of 5%, with an approximate 5% growth in polyethylene.
The decision to raise the price target was influenced by higher peer multiples, indicating an optimistic view of Dow's valuation compared to similar companies in the industry. Despite the price target increase, Mizuho maintained its neutral rating on Dow shares, suggesting a balanced view of the stock's potential performance in the market.
InvestingPro Insights
In light of Mizuho Securities' updated stance on Dow Inc. (NYSE: DOW), it's pertinent to consider additional insights from InvestingPro. The company's strategy of aggressive share buybacks signals confidence from management in the company's value, as reflected in the InvestingPro Tips which also point out Dow's high shareholder yield and expectations of net income growth this year. Analysts have taken a positive stance as well, with eight of them revising their earnings estimates upwards for the upcoming period.
From the real-time data available on InvestingPro, Dow Inc. boasts a solid market capitalization of $39.69 billion and trades at a P/E ratio of 33.96, which adjusts to 30.79 based on the last twelve months as of Q4 2023. The company's dividend yield stands at an attractive 4.96%, with its stock trading near its 52-week high, indicating a strong market position. However, it's important to note that the company has experienced a decrease in revenue growth, with a -21.58% change over the last twelve months as of Q4 2023.
For investors seeking a deeper analysis, there are additional InvestingPro Tips available that could provide further clarity on Dow's financial health and market standing. By using the coupon code PRONEWS24, readers can get an additional 10% off a yearly or biyearly Pro and Pro+ subscription, unlocking even more expert insights into Dow and the chemicals industry at large.
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