Dow Inc. (NYSE:DOW) is scheduled to come up with its second-quarter 2019 results before the opening bell on Jul 25. The company is expected to face challenges from higher expected planned turnaround costs, margin pressure and currency headwinds. However, it will likely gain from higher expected demand and cost synergy savings in the quarter.
Dow’s shares are down around 11% over the past three months, compared with the roughly 14.3% decline recorded by the industry.
Meanwhile, the company expects its Packaging & Specialty Plastics segment to continue to benefit from sustained strong demand, especially in functional polymers in the June quarter. However, the division is expected to face headwind from lower polyethylene pricing and margins.
Dow is also expected face headwinds from currency pressures in the June quarter. The company expects year over year currency headwinds of $20 million each for Performance Materials & Coatings and Industrial Intermediates & Infrastructure units for the second quarter. Moreover, currency is projected to be a roughly $50 million headwind for the Packaging & Specialty Plastics segment.
What the Zacks Model Says
Our proven model does not show that Dow is likely to beat the Zacks Consensus Estimate this quarter. This is because a stock needs to have both — a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) — for this to happen. This is not the case here as you will see below:
Earnings ESP: Earnings ESP for Dow is -4.47%. This is because the Most Accurate Estimate is currently pegged at 82 cents while the Zacks Consensus Estimate stands at 86 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: Dow carries a Zacks Rank #3, which when combined with a negative ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks That Warrant a Look
Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Arconic Inc. (NYSE:ARNC) has an Earnings ESP of +0.83% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Barrick Gold Corporation (NYSE:GOLD) has an Earnings ESP of +2.56% and carries a Zacks Rank #3.
AK Steel Holding Corporation (NYSE:AKS) has an Earnings ESP of +71.43% and carries a Zacks Rank #3.
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