Zinger Key Points
- Dow Q4 sales fell 4% Y/Y to $10.4B, missing estimates, with EPS at $0.00 vs. $0.24 expected.
- Company targets $1B cost savings, including 1,500 job cuts and reduced capital spending.
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Dow Inc DOW shares are trading lower after the company reported fourth-quarter results and disclosed cost-saving targets.
Sales declined 2% year over year to $10.4 billion, missing the consensus of $10.51 billion, on weakness in Packaging & Specialty Plastics segments.
Sequentially, net sales fell 4%, led by seasonal declines in Performance Materials & Coatings. Local prices fell 3% year-over-year and sequentially due to declines in all operating segments.
Volume rose by 1% Y/Y on increases across most regions. However, volume fell 1% sequentially, owing to seasonally weak demand in Performance Materials & Coatings.
Operating EBIT declined to $454 million from $559 million a year ago, while the margin contracted by 90 bps to 4.4% for the quarter.
Adjusted EPS was $0.00, missing the consensus of $0.24. Adjusted EPS included higher-than-expected non-cash tax adjustments of $0.27, mainly related to Argentina, amplified by inflation.
Packaging & Specialty Plastics sales fell 6% Y/Y to $5.3 billion, and the operating EBIT margin of 8.4% was down by 340 bps.
Industrial Intermediates & Infrastructure sales remained flat Y/Y at $2.95 billion, and the operating EBIT margin expanded to 2.8% from 0.5% in the year-ago quarter.
Performance Materials & Coatings sales rose 4% Y/Y to $1.97 billion, and the operating EBIT margin was (0.5)% vs. (3.2)% in the prior-year quarter.
Operating cash flow from continuing operations for the quarter was $811 million, and free cash flow was $44 million. Dow returned $2.5 billion to the shareholders in the year, including $2 billion in dividends and $0.5 billion in share repurchases.
In December 2024, Dow entered into a definitive agreement to sell a 40% equity stake in select U.S. Gulf Coast infrastructure assets to a fund managed by Macquarie Asset Management.
Jim Fitterling, chair and chief executive officer, said, “Despite persistently weak macroeconomic conditions, Team Dow delivered our fifth consecutive quarter of year-over-year volume growth, leveraging our cost-advantaged footprint to capture resilient demand for high-value applications.”
“We remain confident that Dow will benefit from the completion of our near-term incremental growth projects and an enhanced focus on operational discipline in 2025. In addition, we are optimistic that we will see further demand growth in attractive end markets such as packaging, energy and electronics.”
To navigate the economic downturn, the company expects to reduce 2025 capital expenditures by $300 million-$500 million.
Cost Saving Target: Dow targets cost savings of $1 billion on an annual run-rate basis.
The company plans to achieve this goal through a headcount reduction of around 1,500 roles globally and a direct cost cut of $500 million to $700 million.
Dow expects to incur a charge of $250 million to $325 million in the first quarter of 2025 for costs primarily related to severance and associated benefits.
The company recognizes expenses for implementing these actions, as incurred, ranging from $20 million to $30 million.
Investors can gain exposure to the stock via Invesco S&P 500 Equal Weight Materials ETF RSPM and FT Vest DJIA Dogs 10 Target Income ETF DOGG.
Price Action: DOW shares are down 2.58% at $39.99 premarket at the last check Thursday.
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