Earnings Preview : The Dow Chemical Company (NYSE:DOW) - Q2 2010
Tuesday, August 03, 2010 1:31 AM

The Dow Chemical Company is scheduled to report Q2-2010 quarter (AMJ) results on Tuesday, August 3, 2010. In the last three quarter ending March 2010, the company's reported eps exceeded analysts' consensus estimates by margins in the range of 43.81% and 152.63%.

The Dow Chemical Company (Dow) is engaged in the manufacture and sale of chemicals, plastic materials, agricultural and services, and other specialized products and services. It delivers a range of products and services to customers in approximately 160 countries to growth sectors such as electronics, water, energy, coatings and agriculture. The Company operated 214 manufacturing sites in 37 countries. Dow operates in eight business segments: Electronic and Specialty materials, Coatings and Infrastructure, Health and Agricultural sciences, Performance systems, Performance products, Basic plastics, Basic chemicals, and Hydrocarbons and Energy. The Company is also engaged in the property and casualty insurance and reinsurance business primarily through its Liana Limited subsidiaries.

For the first quarter, the company reported sales were $1.35 billion, 31% higher than sales of $1.03 billion in the same quarter of 2009. The company reported consolidated net income of $218.3 million for the first quarter of 2010, compared to consolidated net income of $9.4 million in the first quarter of 2009. Adjusted net income came in at $172.6 million for the first quarter of 2010.  Adjusted net income excluded the tax benefit related to the U.S. Advanced Energy Manufacturing Tax Credits. In 2009 consolidated adjusted net income was $66.7 million for the first quarter.

Analysts' estimates for the second quarter range from a low of $0.5 to a high of $0.62, compared to a consensus estimate of $0.56. For the second quarter, the consensus EPS forecast has decreased over the past week from $0.566 to $0.560 (-1.06%) and decreased over the past month from $0.597 to $0.560 (-6.20%). Of the 11 analysts making quarterly forecasts, none raised and 6 lowered their forecast.

Downward revision in analysts' consensus estimate is attributable to significant inflation in raw materials impacting the company's margins. I also see some demand contraction from Dow's clients. On a positive note, Dow Corning's silicones business seems to be picking up as the company's Hemlock Semiconductor continues to run at full capacity, and the company is expected to have brought new capacity online in the second quarter. Net on net, I see some inventory build-up.

In May 2010, OMNOVA Solutions Inc. acquired The Dow Chemical Company's hollow sphere plastic pigment (HPP) product line and terminated the RohmNova paper coatings joint venture.

The stock closed Monday at $28.33, compared to 52 week range of $19.75 and $32.05. YTD, the share price is marginally up by $0.04 or 0.14%.



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