What transforms a stock that has plummeted over 35% since the start of the year into a sudden top performer? Dow Inc provided a surprising answer last week. The market celebrated the chemical giant with a 13% surge, even as the company reported declining revenues and a quarterly loss. Evidently, investors are seeing value beyond the stark headline figures.
Decoding the Market’s Reaction
The apparent contradiction between weak fundamentals and a powerful share price advance becomes clearer upon a detailed examination. While third-quarter revenue did fall by 8% to $10 billion, resulting in a loss of $0.19 per share, the company’s operating profit before interest and taxes (EBIT) showed remarkable improvement. It increased by a substantial $201 million compared to the previous quarter.
This impressive operational turnaround can be attributed to several key developments:
* Initial successes from aggressive cost-reduction initiatives are materializing.
* New production facilities along the U.S. Gulf Coast are ramping up more effectively than anticipated.
* Reduced maintenance expenses are providing relief to the balance sheet.
* Key business segments are reporting volume growth.
Should investors sell immediately? Or is it worth buying Dow?
Lingering Caution Among Market Experts
Despite the positive momentum that pushed the stock to a Friday close of $24.80—placing it 15% above its 50-day moving average—analysts maintain a cautious stance. The prevailing consensus recommendation remains “Hold,” with an average price target of $26.93. This suggests a potential upside of just 8% from current levels.
A particularly telling statistic is that, even after this recent recovery, Dow shares continue to trade 47% below their 52-week high, recorded in October 2024. Looking ahead, market observers still project negative earnings for 2025, albeit at a less severe level.
The critical question now is whether Dow can leverage this positive impulse and definitively leave its lows behind. Or is this merely a temporary rebound within a persistent downward trend? The answer hinges on the company’s ability to prove that its cost-saving measures can durably offset the ongoing weak demand plaguing the chemical industry.
Ad
Dow Stock: Buy or Sell?! New Dow Analysis from February 7 delivers the answer:
The latest Dow figures speak for themselves: Urgent action needed for Dow investors. Is it worth buying or should you sell? Find out what to do now in the current free analysis from February 7.
Dow: Buy or sell? Read more here...
