Overall for the period, Dow booked a profit of $1.22 billion, or 97 cents a share, up from $967 million, or 73 cents, a year earlier. Second-quarter results also compare to the Thomson Reuters consensus estimates for EPS of $0.83 and $12.96 billion in revenues.
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Dow has moved its focus to more lucrative businesses such as performance plastics and electronics to lower its exposure to commoditized chemicals. The company in the last quarter same year reported adjusted net earnings of $893 million or an adjusted EPS of $0.74.
Midland, Mich.-based Dow reported second-quarter and first-half results on July 23.
Lower prices for oil, used as a raw material for plastics in Europe, and propane, a gas liquid used for the same objective in the U.S., contributed to the highest ever second-quarter earnings in the plastics unit, Dow’s largest business. European competitors have relied on expensive oil based fuels in the past. We believe that the company’s margin-expansion streak that has been going on for the last ten quarters could be broken this time around, because of the sharp decline in benchmark crude oil prices that has narrowed the spread between crude oil-derived naphtha and ethane cracking. Dow said Thursday it received several significant regulatory clearances for a plan to sell off a chunk of its chlorine operations in Freeport to Olin Corp.in a $5 billion deal. The company is commission the project which aims to capitalize on a swell of cheap natural gas unleashed by the shale boom, Dow said.
In the face of those issues, Dow brought its cost of sales down 18% in the quarter. Five analysts surveyed by Zacks expected $13.11 billion. In addition, the positive impact of productivity cost savings from higher operating leverage could also provide a cushion to the company’s unit profitability. He added that Dow sees “growing momentum” in construction, packaging and automotive markets, which is outweighing some softness in agriculture and energy-related markets.
Dow’s shares were down 2.8 percent at $48.58 in late morning trading, easing from a day-low of $47.10. While analyst Charles Neivert from Cowan and Company was the most bearish on the stock rating it as Market Perform and estimating the 12 month price at $47.
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In the plastics unit, earnings before interest, taxes, depreciation and amortization rose 15 percent to $1.17 billion, Dow said.
