Analyst Upgrades Dow, Calls Capex Cut And Asset Sales Positive

Fermium Research analyst Frank J. Mitsch upgraded Dow Inc. DOW from Hold to Buy at a price forecast of $35.

On Thursday, the company reported better-than-expected first-quarter 2025 sales of $10.431 billion, beating the consensus of $10.24 billion, and adjusted EPS of $0.02, beating the consensus estimate of a $0.01 loss.

The analyst views Dow’s decision to postpone the Ft. Saskatchewan Path2Zero project, which is expected to yield an additional $600 million in capex savings in 2025, as a significant positive.

Also Read: Dow Downgraded: Analyst Blames ‘Perfect Storm’ Of Weak Macro, High Costs, Trade Barriers

Mitsch believes that this, coupled with the Macquarie infrastructure sale(s) and anticipated NOVA litigation proceeds, should ease dividend concerns for 2025 and 2026.

Nevertheless, the anticipated negative free cash flow of up to $1 billion in the first half of 2025 is a point of concern, adds the analyst.

The analyst anticipates a reversal in the second half, driven by working capital inflows, reduced maintenance spending, and increased EBITDA from new projects and cost reductions.

Amid the continued weak macroeconomics, the analyst lowered 2025 EPS estimates from $1.61 to $0.29 (consensus $1.40) and EBITDA estimates from $5.20 billion to $4.05 billion (consensus $4.82 billion).

Also, Mitsch cuts second-quarter EPS and EBITDA estimates from $0.48 and $1.39 billion to $0.00 and $960 million (vs. consensus of $0.33 and $1.25 billion), respectively.

Investors can gain exposure to the stock via Materials Select Sector SPDR XLB and Invesco S&P 500 High Dividend Low Volatility ETF SPHD.

Price Action: DOW shares are up 0.37% at $29.87 at the last check Friday.

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