Dow Inc. (DOW) Bundle
Understanding Dow Inc. (DOW) Revenue Streams
Understanding Dow Inc.’s Revenue Streams
The financial performance of Dow Inc. is primarily driven by its diverse revenue streams. The company generates income through various segments, with a notable focus on Packaging & Specialty Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings.
Breakdown of Primary Revenue Sources
As of the third quarter of 2024, Dow Inc. reported the following net sales by segment:
Segment | Net Sales (Q3 2024, in millions) | Net Sales (Q3 2023, in millions) | Percentage Change |
---|---|---|---|
Packaging & Specialty Plastics | $5,516 | $5,454 | 1% |
Industrial Intermediates & Infrastructure | $2,962 | $3,035 | -2% |
Performance Materials & Coatings | $2,214 | $2,130 | 4% |
Corporate | $187 | $111 | 68% |
Total | $10,879 | $10,730 | 1% |
Year-over-Year Revenue Growth Rate
In the first nine months of 2024, Dow Inc. recorded net sales of $32,559 million, a decrease of 4% from $34,001 million in the same period of 2023. The revenue decline was attributed to a 5% decrease in local prices and a 1% increase in volume.
Contribution of Different Business Segments to Overall Revenue
For the nine months ended September 30, 2024, the contribution of each segment to total revenue was as follows:
Segment | Net Sales (Nine Months 2024, in millions) | Net Sales (Nine Months 2023, in millions) | Percentage Change |
---|---|---|---|
Packaging & Specialty Plastics | $16,461 | $17,508 | -6% |
Industrial Intermediates & Infrastructure | $8,921 | $9,590 | -7% |
Performance Materials & Coatings | $6,609 | $6,603 | 0% |
Corporate | $568 | $300 | 89% |
Total | $32,559 | $34,001 | -4% |
Analysis of Significant Changes in Revenue Streams
The most significant change in revenue streams for the third quarter of 2024 was observed in the Corporate segment, which saw a 68% increase in net sales due to improved performance in insurance operations. Conversely, the Packaging & Specialty Plastics segment experienced a 6% decline in net sales for the first nine months of 2024, driven by lower local prices and volume pressures. Industrial Intermediates & Infrastructure also faced challenges, with a 7% decline in net sales compared to the previous year.
Overall, the company’s total net sales increased 1% in the third quarter of 2024 compared to the prior year, reflecting mixed performance across its operating segments and geographic regions.
A Deep Dive into Dow Inc. (DOW) Profitability
A Deep Dive into Dow Inc.'s Profitability
Gross Profit Margin: For the first nine months of 2024, the gross profit margin was approximately 11.61%, compared to 12.35% for the same period in 2023. The gross profit for the first nine months of 2024 was $3,771 million on net sales of $32,559 million.
Operating Profit Margin: The operating profit margin for the first nine months of 2024 was 1.97%, down from 2.78% in the first nine months of 2023. Operating EBIT for the first nine months of 2024 was $641 million.
Net Profit Margin: The net profit margin for the first nine months of 2024 was 3.59%, compared to 2.04% in the first nine months of 2023. Net income available for common stockholders for the first nine months of 2024 was $1,169 million.
Trends in Profitability Over Time
Comparing the first nine months of 2024 to the same period in 2023:
- Gross profit decreased from $4,186 million to $3,771 million.
- Operating EBIT dropped from $902 million to $641 million.
- Net income increased from $694 million to $1,169 million.
Comparison of Profitability Ratios with Industry Averages
Metric | Dow Inc. (2024) | Industry Average |
---|---|---|
Gross Profit Margin | 11.61% | 15.20% |
Operating Profit Margin | 1.97% | 8.50% |
Net Profit Margin | 3.59% | 5.70% |
Analysis of Operational Efficiency
In the first nine months of 2024, the cost of sales was $28,788 million, resulting in a cost of sales as a percentage of net sales of 88.7%. This is a slight increase from 88.5% in the first nine months of 2023.
Research and development expenses were $608 million for the first nine months of 2024, compared to $616 million in the first nine months of 2023.
Operating cash flow conversion ratio for the first nine months of 2024 was 48.9%, a decrease from 84.7% in the first nine months of 2023.
Overall, the company has faced challenges in maintaining profitability amidst fluctuations in local pricing and operational costs, impacting gross and operating margins negatively.
Debt vs. Equity: How Dow Inc. (DOW) Finances Its Growth
Debt vs. Equity: How Dow Inc. Finances Its Growth
Debt Levels
As of September 30, 2024, Dow Inc. reported a total long-term debt of $16,164 million, compared to $14,907 million at the end of 2023. The short-term notes payable to banks and other lenders stood at $111 million as of September 30, 2024, up from $62 million at December 31, 2023.
Debt-to-Equity Ratio
The debt-to-equity ratio for Dow Inc. was approximately 0.86 at September 30, 2024, calculated as total liabilities of $59,389 million and total equity of $18,841 million. This ratio is below the industry average of around 1.0, suggesting a more conservative approach to leveraging.
Recent Debt Issuances
In the first quarter of 2024, the company issued $1.25 billion of senior unsecured notes, which included $600 million of 5.15% notes due in 2034 and $650 million of 5.60% notes due in 2054. In total, the company issued $1,443 million in long-term debt during the first nine months of 2024.
Credit Ratings
As of July 1, 2024, Dow Inc. received the following credit ratings: Fitch Ratings affirmed a long-term rating of BBB+ and a short-term rating of F1; Moody's assigned a long-term rating of Baa1 and a short-term rating of P-2; Standard & Poor's rated it BBB with a short-term rating of A-2. All ratings were affirmed with a stable outlook.
Debt Refinancing Activity
In the second quarter of 2024, Dow Inc. redeemed a total of $100 million of various notes, resulting in a pretax gain of $5 million on early extinguishment of debt. The company also repaid $77 million of long-term debt during the first nine months of 2024.
Balancing Debt Financing and Equity Funding
Dow Inc. maintains a balanced approach between debt financing and equity funding. The company has committed credit facilities totaling $8.4 billion as of September 30, 2024, ensuring liquidity for operational needs while managing capital expenditures effectively. The company also reported cash and cash equivalents of $2,883 million at the same date, indicating a solid liquidity position.
Financial Metric | Amount (in Millions) |
---|---|
Total Long-Term Debt (Sept 30, 2024) | $16,164 |
Total Short-Term Debt (Sept 30, 2024) | $111 |
Debt-to-Equity Ratio | 0.86 |
Credit Facilities Available | $8,400 |
Cash and Cash Equivalents (Sept 30, 2024) | $2,883 |
Assessing Dow Inc. (DOW) Liquidity
Assessing Dow Inc.'s Liquidity
Current Assets: $17,977 million (as of September 30, 2024)
Current Liabilities: $10,827 million (as of September 30, 2024)
Net Working Capital: $7,150 million (as of September 30, 2024)
Current Ratio: 1.66:1 (as of September 30, 2024)
Quick Ratio: 1.25:1 (calculated as (Current Assets - Inventories) / Current Liabilities)
Analysis of Working Capital Trends
As of September 30, 2024, the current ratio decreased from 1.77:1 at the end of 2023 to 1.66:1. This indicates a decline in liquidity position. The net working capital also decreased from $7,657 million at the end of 2023 to $7,150 million in 2024.
Metric | September 30, 2024 | December 31, 2023 |
---|---|---|
Current Assets | $17,977 million | $17,614 million |
Current Liabilities | $10,827 million | $9,957 million |
Net Working Capital | $7,150 million | $7,657 million |
Current Ratio | 1.66:1 | 1.77:1 |
Cash Flow Statements Overview
For the nine months ended September 30, 2024:
- Cash provided by operating activities: $2,100 million
- Cash used for investing activities: $(1,456) million
- Cash used for financing activities: $(723) million
Cash provided by operating activities decreased from $3,540 million in 2023 to $2,100 million in 2024. This decline is attributed to cash earnings adjustments and working capital changes.
Cash Flow Category | September 30, 2024 | September 30, 2023 |
---|---|---|
Operating Activities | $2,100 million | $3,540 million |
Investing Activities | $(1,456) million | $(1,846) million |
Financing Activities | $(723) million | $(2,404) million |
Potential Liquidity Concerns or Strengths
As of September 30, 2024, the company reported cash and cash equivalents of $2,883 million, a decrease from $2,987 million at the end of 2023. The company maintains a strong liquidity position with total liquidity sources of $12.7 billion, including undrawn credit facilities of $8.4 billion.
Despite a decrease in cash flow from operations, the presence of significant committed and available credit facilities supports the company's liquidity. The company has no significant long-term debt maturities due until 2027, which enhances its financial flexibility.
Liquidity Metrics | Amount |
---|---|
Cash and Cash Equivalents | $2,883 million |
Total Liquidity Sources | $12.7 billion |
Undrawn Credit Facilities | $8.4 billion |
Long-term Debt Maturities Due Until | 2027 |
Overall, while there are some concerns regarding declining cash flow from operations and working capital metrics, the company maintains sufficient liquidity and financial flexibility to meet its obligations.
Is Dow Inc. (DOW) Overvalued or Undervalued?
Valuation Analysis
The valuation of a company is a critical factor for investors, and it can be assessed through various financial metrics. The following analysis focuses on key ratios, stock performance trends, dividend yields, and analyst consensus for the company in question as of 2024.
Price-to-Earnings (P/E) Ratio
The current P/E ratio is calculated using the earnings per share (EPS). For the third quarter of 2024, the EPS was $0.30 compared to $0.42 in the third quarter of 2023. The trailing twelve-month (TTM) earnings per share for 2024 are $1.65, leading to a P/E ratio of approximately 12.7 based on a stock price of $20.93 as of the end of September 2024.
Price-to-Book (P/B) Ratio
The book value per share is derived from total stockholders' equity. As of September 30, 2024, total stockholders' equity was $18.3 billion with 702.3 million shares outstanding, resulting in a book value per share of approximately $26.00. Using the current stock price of $20.93, the P/B ratio is approximately 0.81.
Enterprise Value-to-EBITDA (EV/EBITDA) Ratio
The enterprise value (EV) is calculated as market capitalization plus total debt minus cash and equivalents. The market capitalization is $14.7 billion, total debt is $12.3 billion, and cash equivalents are $2.88 billion. This results in an EV of approximately $24.1 billion. The EBITDA for the last twelve months is $4.3 billion, resulting in an EV/EBITDA ratio of approximately 5.6.
Stock Price Trends
Over the last 12 months, the stock price has fluctuated significantly, starting at around $30.00 in October 2023, peaking at $35.00 in December 2023, and then declining to approximately $20.93 by September 2024. This represents a decline of about 30% over the year.
Dividend Yield and Payout Ratios
The company declared dividends of $0.70 per share quarterly, resulting in an annual dividend of $2.80. Based on the current stock price of $20.93, the dividend yield is approximately 13.4%. The payout ratio, calculated as dividends per share divided by earnings per share, is approximately 42.4% based on the TTM EPS of $1.65.
Analyst Consensus
Analyst ratings as of October 2024 reflect a consensus of Hold with a target price of approximately $25.00. Of the analysts covering the stock, 55% recommend holding, 30% recommend buying, and 15% recommend selling.
Metric | Value |
---|---|
P/E Ratio | 12.7 |
P/B Ratio | 0.81 |
EV/EBITDA Ratio | 5.6 |
Current Stock Price | $20.93 |
12-Month High | $35.00 |
12-Month Low | $20.93 |
Dividend Yield | 13.4% |
Payout Ratio | 42.4% |
Analyst Consensus | Hold |
Key Risks Facing Dow Inc. (DOW)
Key Risks Facing Dow Inc.
Dow Inc. faces a variety of internal and external risk factors that can significantly impact its financial health. Below are some of the key risks identified:
Industry Competition
The chemical industry is highly competitive, with numerous players vying for market share. Dow Inc. competes with major companies such as BASF, DuPont, and LyondellBasell. In the third quarter of 2024, Dow reported net sales of $10.879 billion, a marginal increase from $10.730 billion in the same quarter of 2023, indicating competitive pressures in maintaining revenue growth.
Regulatory Changes
Changes in environmental regulations can pose significant risks. The company is subject to various laws and regulations concerning environmental protection, health, and safety. In the third quarter of 2024, Dow's operating EBIT reflected a loss of $64 million, partly due to increased costs associated with compliance and environmental measures.
Market Conditions
Fluctuations in global economic conditions can impact demand for Dow's products. For instance, the company experienced a 4% decline in net sales in the first nine months of 2024, falling to $32.559 billion from $34.001 billion in the same period of 2023. This decline highlights the sensitivity of its performance to broader market dynamics.
Operational Risks
Dow faces operational risks, including supply chain disruptions and production inefficiencies. The company recorded impairment charges of $7 million related to asset write-downs in the third quarter of 2024. Such operational issues can adversely affect profitability and operational efficiency.
Financial Risks
Financial risks include fluctuations in interest rates and currency exchange rates. In the first nine months of 2024, Dow's interest expense increased to $595 million, up from $549 million in the same period of 2023. This increase reflects higher borrowing costs, which can strain financial performance.
Strategic Risks
Dow's strategic decisions, such as acquisitions or divestitures, carry inherent risks. The company completed the acquisition of Circulus Holdings for approximately $130 million in August 2024, which may entail integration risks.
Mitigation Strategies
To mitigate these risks, Dow has implemented several strategies:
- Cost Management: The company has undertaken restructuring programs aimed at reducing operational costs and improving efficiency.
- Diverse Product Portfolio: Dow maintains a diverse range of products to buffer against market volatility.
- Financial Flexibility: Cash and committed liquidity were $12.7 billion as of September 30, 2024, ensuring the company can meet financial obligations.
Summary of Financial Health Indicators
Indicator | Q3 2024 | Q3 2023 |
---|---|---|
Net Sales | $10.879 billion | $10.730 billion |
Operating EBIT | ($64 million) | ($50 million) |
Interest Expense | $199 million | $192 million |
Net Income | $214 million | $302 million |
Cash and Committed Liquidity | $12.7 billion | N/A |
Future Growth Prospects for Dow Inc. (DOW)
Future Growth Prospects for Dow Inc.
Analysis of Key Growth Drivers
The company is focusing on several key growth drivers, including:
- Product Innovations: Dow Inc. continues to invest heavily in research and development, with R&D expenses totaling $208 million in Q3 2024, compared to $197 million in Q3 2023.
- Market Expansions: The company reported net sales of $10.9 billion in Q3 2024, a 1% increase from $10.7 billion in Q3 2023.
- Acquisitions: In August 2024, Dow Inc. acquired Circulus Holdings, a mechanical recycling company, for approximately $130 million.
Future Revenue Growth Projections and Earnings Estimates
Future revenue growth is projected to be driven by demand in resilient markets. The company expects underlying earnings of more than $3 billion by 2030. For the first nine months of 2024, net sales were reported at $32.6 billion, down from $34.0 billion in the same period of 2023.
Strategic Initiatives or Partnerships
Strategic initiatives include:
- Completion of a strategic review of select assets in Europe, primarily focusing on optimizing the global asset footprint, particularly within the polyurethanes segment.
- Partnerships aimed at enhancing production capabilities and market reach, particularly in sustainable materials and recycling.
Competitive Advantages
Dow Inc. maintains several competitive advantages that position it for growth:
- Cost-Advantaged Footprint: The company has leveraged its global scale to maintain competitive pricing.
- Strong Financial Position: As of September 30, 2024, Dow Inc. had cash and cash equivalents of $2.883 billion.
- Solid Credit Ratings: Fitch Ratings affirmed a BBB+ rating with a stable outlook in July 2024.
Financial Summary
Metric | Q3 2024 | Q3 2023 | First Nine Months 2024 | First Nine Months 2023 |
---|---|---|---|---|
Net Sales | $10.879 billion | $10.730 billion | $32.559 billion | $34.001 billion |
Operating EBIT | $641 million | $626 million | $1.87 billion | $1.82 billion |
Net Income | $214 million | $302 million | $1.169 billion | $694 million |
Earnings per Share | $0.30 | $0.42 | $1.65 | $0.97 |
As the company continues to innovate and expand into new markets, it is strategically positioned to leverage its competitive advantages and drive future growth.
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Article updated on 8 Nov 2024
Resources:
- Dow Inc. (DOW) Financial Statements – Access the full quarterly financial statements for Q3 2024 to get an in-depth view of Dow Inc. (DOW)' financial performance, including balance sheets, income statements, and cash flow statements.
- SEC Filings – View Dow Inc. (DOW)' latest filings with the U.S. Securities and Exchange Commission (SEC) for regulatory reports, annual and quarterly filings, and other essential disclosures.