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On Friday, JPMorgan analyst Jeffrey Zekauskas revised the price target for Dow Inc. (NYSE:DOW) shares, reducing it to $40.00 from the previous $47.00. Despite this change, the analyst maintained an Overweight rating on the stock. Currently trading at $38.55, near its 52-week low of $37.49, InvestingPro analysis suggests the stock is undervalued, with additional insights available in the comprehensive Pro Research Report covering this prominent chemicals industry player. The adjustment comes after a close examination of Dow’s financial performance in 2024, where the company experienced a significant decrease in cash flow despite stable EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) levels.
Zekauskas noted that Dow has historically been adept at generating cash in relation to its EBITDA. However, 2024 marked a deviation from this trend, with cash flow declining by $2.3 billion year-over-year, even though EBITDA remained relatively flat at approximately $5.4 billion. Despite these challenges, the company maintains a notable 7.26% dividend yield, although InvestingPro data shows 9 analysts have recently revised their earnings expectations downward. The primary factors contributing to the reduced cash flow were a downturn in other assets and liabilities, which fell by $943 million, and pension benefits and costs, which decreased by $758 million. A portion of the $943 million decline was attributed to new tax assessments imposed during the year.
Dow’s financial obligations in 2024 added up to around $4.9 billion, consisting of $2.9 billion in capital expenditures and $2.0 billion in dividend payments. The company’s cash flow fell short by $2 billion when it came to covering these expenses. Looking ahead, Dow has projected its cash flow from operations for 2025 to be about 70% of its operating EBITDA. This forecast suggests an estimated $3.5 billion in operational cash flow, based on an anticipated $5 billion in EBITDA, and points to a potential cash shortfall of approximately $1.5 billion. With a market capitalization of $27.08 billion and a P/E ratio of 25.85, investors seeking deeper insights into Dow’s financial health metrics and peer comparison can access comprehensive analysis through InvestingPro’s detailed research tools.
In other recent news, Dow Inc. has been the focus of several significant developments. Citi analyst Pat Cunningham revised the price target for Dow Inc. shares to $39.00, down from the previous target of $40.00, while maintaining a Neutral rating on the stock. The adjustment follows Dow’s recent commentary on its pricing and cost challenges, particularly within its Performance & Specialty Plastics segment.
In an effort to mitigate rising costs, Dow has announced a series of measures aimed at achieving $1 billion in cost savings, including a reduction in direct costs and a decrease in its workforce by about 1,500 roles worldwide. The company anticipates recording a charge between $250 million and $325 million in the first quarter of 2025 for severance and related benefits.
In recent financial results, Dow reported lower-than-expected earnings for its fourth quarter, with adjusted earnings per share of $0.00, falling short of the projected $0.29. The company’s revenue also missed expectations, coming in at $10.4 billion, under the anticipated $10.58 billion. Despite these results, Dow plans to mitigate the impact of challenging economic conditions by reducing 2025 capital expenditures by $300-500 million. These are the latest developments for Dow Inc.
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