What to Expect from Dow Chemical's 1Q17 Earnings

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Part 2
What to Expect from Dow Chemical's 1Q17 Earnings PART 2 OF 5

Why Analysts Expect Dow Chemical’s Revenues to Turn Around

Dow Chemical’s revenue estimates

With Dow Chemical (DOW) announcing its 1Q17 earnings on April 27, 2017, analysts expect its revenues to rise on a YoY (year-over-year) basis.

As of April 19, 2017, analysts expect DOW to post revenues of $12.5 billion in 1Q17 compared with $10.7 billion in 1Q16, an increase of 16.4%. This expected increase in DOW’s revenue would mean that the company’s revenues are finally turning around after two years of decline.

Why Analysts Expect Dow Chemical&#8217;s Revenues to Turn Around

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What could drive DOW revenues up?

After DOW acquired the remaining 50% stake in the DOW-Corning (GLW) joint venture, DOW began to integrate the DOW-Corning revenues in 2Q16. In 1Q17, this will again be a major driving force for DOW’s revenue growth. Plus, the increase in consumer demand, particularly in packaging, infrastructure, consumer care, and automotive business is expected to drive the volumes up. The expansion of its Louisiana ethylene plant and its Texas gas-phase polyethylene facility is also expected to contribute to DOW’s revenue growth.

DOW’s Sadara joint venture in the Middle East has started production of polyethylene and is expected to contribute to DOW’s overall revenues. Additionally, the weakness in the US dollar against the basket of currencies could bring down the adverse impact of foreign currency translations.

On the other hand, the divestiture of the global ethylene acrylic acid copolymers and ionomers business to SK Global Chemical, a subsidiary of SK Innovation, could have an adverse impact on DOW’s overall revenue. This divestiture was made to satisfy conditions of the merger with DuPont (DD).

Investors can indirectly hold Dow Chemical by investing in the Materials Select Sector SPDR ETF (XLB), which invests 12.1% of its portfolio in DOW. The other top holdings of the fund include Monsanto (MON) and Praxair (PX) with weights of 8.9% and 5.9%, respectively, as of April 19, 2017.

In the next part, we’ll look into Wall Street analyst estimates for Dow Chemical’s earnings.


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