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Dow Chemical (DOW)
Dow Chemical Results Not Electrifying Enough?
Chemicals, plastics, and other materials aren't exactly at the top of the list of items that are recession-proof. In fact, during a recession, basic materials are one of the items that manufacturers might try to find cheaper replacements for, and/or figure out alternatives to the products they were previously using. So for Dow Chemical, the largest chemical maker in the United States, the recession hasn't been smooth sailing. And as the company has had its fair share of both highs and lows, why did the company's fourth quarter results send shares tumbling down as much as 5% in early morning trading?
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Interestingly enough, the company's fourth quarter results were better than anticipated. Dow Chemical reported a profit of $172 million, working out to 8 cents a share, or 18 cents a share after excluding one-time charges. Furthermore, revenue rose to $12.47 billion. Both numbers beat expectations, as analysts had been expecting a profit of only 11 cents a share, and revenue of $11.81 billion. Aside from just beating expectations, this was also a significant improvement from the year before, when the company reported a net loss of $1.55 billion, or 63 cents per share after excluding one-time charges.
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So why are investors reacting negatively to this good news? Well, perhaps it's because of some of the steps the company had to take in order to get to this point. Over the last year or so, the company has had to fire employees, sell assets including some of its subsidiary companies such as Morton Salt, and reduce the shareholder dividend. Additionally, although the overall numbers were strong, most of the company's growth was in Asia, while growth continued to be slow in the United States, as the country continues to battle unemployment and effects of the recession. CEO Andrew Liveris acknowledged this, saying "Growth will continue to lag in the U.S. and Europe, however, as high unemployment persists and questions about the sustainability of government stimulus spending remain."
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However, others have indicated that this morning's sell-off may have just been investors taking the opportunity to sell on the good news. Along with the strong profit, the company also reported that it has repaid the loan that it took to purchase Rohm & Haas in 2008 (a $15 billion purchase), it greatly reduced the amount of debt due next year, and also increased its cash on hand. As we have seen the majority of the chemical companies meet or beat expectations, it looks like the chemical sector is finally turning itself around, and with this in mind, it seems as if Dow Chemical is making smart choices to position itself in a strengthening economy.
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Dow Chemical Commentary:
Dow Posts Encouraging Results - Analyst Blog - Some more specific details about Dow Chemical's fourth quarter results.
Dow Chemical CEO to Obama: Jobs must dominate speech - Last week, Dow Chemical had some advice for U.S. President Obama.
Dow Chemical Chief Pushes Ahead - Wall Street Journal interviewed CEO Andrew Liveris, view the article for Q&A plus a video segment discussing his plans for the company.
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More Stocks in the News:
UPS 4Q Profit Surges On Year-Earlier Charges, Higher Margins - UPS (UPS: Charts, News, Offers) delivers strong profits, nearly tripled from a year ago, and forecasted that the recession is over.
Hershey 4Q Profit Climbs; Dividend Raised - Hershey (HSY: Charts, News, Offers) posted strong earnings on increased candy prices, and confirmed that they will not be bidding against Kraft Foods (KFT: Charts, News, Offers) for Cadbury PLC (CBY: Charts, News, Offers).
Toyota Owners Barrage Dealers as Pedal Fixes Shipped - Toyota (TM: Charts, News, Offers) dealers have seen a huge response from customers who are desperate to get their vehicles fixed.
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Profile |
Click here to view a detailed profile of Dow Chemical.
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