Dow Chemical Co. Earnings: Margins Shrink as Costs Rise

S&P 500 (NYSE:SPY) component Dow Chemical Co. (NYSE:DOW) reported its results for the fourth quarter. Dow Chemical produces chemicals, plastic materials, agricultural, advanced materials, and other products and services, including insurance.

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Dow Chemical Earnings Cheat Sheet for the Fourth Quarter

Results: Reported a loss of $20 million (2 cents per diluted share) in the quarter. The chemicals company had net income of $426 million or 37 cents per share in the year earlier quarter.

Revenue: Rose 2.4% to $14.1 billion from the year earlier quarter.

Actual vs. Wall St. Expectations: Dow Chemical Co. reported adjusted net income of 25 cents per share. By that measure, the company fell short of mean estimate of 32 cents per share. Analysts were expecting revenue of $14.19 billion.

Quoting Management: Andrew N. Liveris, Dow’s chairman and chief executive officer, stated: “Dow saw deterioration in the macro environment mid-quarter and, in line with our stated commitments, we purposefully intervened. In the midst of uncertainty and significant destocking across customer supply chains, we maintained our focus on financial discipline and operating efficiency – evidenced by our tight management of working capital, focus on improving operating rates and significant cash flow generation.”

Key Stats:

Gross margin shrank 2.4 percentage points to 11.8%. The contraction appeared to be driven by increased costs, which rose 5.2% from the year earlier quarter while revenue rose 2.4%.

Revenue has risen the past four quarters. Revenue increased 17.4% to $15.11 billion in the third quarter. The figure rose 17.8% in the second quarter from the year earlier and climbed 9.8% in the first quarter from the year-ago quarter.

The company has now fallen short of estimates in the last two quarters. In the third quarter, it missed expectations by 2 cents with net income of 62 cents versus a mean estimate of net income of 64 cents per share.

Looking Forward: Over the past ninety days, the average estimate for the first quarter of the next fiscal year has fallen from 79 cents per share to 73 cents, indicating that analysts are growing pessisimistic about the company’s performance next quarter. At $2.64 per share, the average estimate for the fiscal year has fallen from $2.71 ninety days ago.

(Company fundamentals provided by Xignite Financials. Earnings estimates provided by Zacks)

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To contact the reporter on this story: Derek Hoffman at staff.writers@wallstcheatsheet.com

To contact the editor responsible for this story: Damien Hoffman at editors@wallstcheatsheet.com