The Dow Plunges as Weak Economic Growth Causes Rare Earnings Disappointments

Shares of Dow Inc. plunged to an eight-month low on Thursday after the materials-science company reported lower-than-expected second-quarter earnings, attributing the shortfall to ongoing economic weakness.

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“The pace of the global macroeconomic recovery has been slower than expected,” stated Chief Executive Jim Fitterling. He further noted that while short-term demand is rising in many of their markets, sectors like building, construction, and consumer durables are not likely to see significant improvement in 2024.

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The stock (DOW) fell 5.2% in premarket trading, positioning it to open at its lowest closing prices since mid-November.

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Net income for the quarter was $439 million, or 62 cents per share, compared to $485 million, or 68 cents per share, in the same period last year. The company reported operating earnings of 68 cents per share, excluding restructuring and efficiency costs, down from 75 cents per share in the previous year. Analysts polled by FactSet had predicted 71 cents per share for the latest quarter.

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This marks Dow’s first profit miss in six quarters and only the second in the past 17 quarters.

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Net sales declined by 4% from the previous year to $10.9 billion, falling short of the FactSet consensus of $11.0 billion. Sequentially, sales increased by 1%, driven by gains in performance materials and coatings as well as packaging and specialty plastics.

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However, from a year ago, revenue from packaging and specialty plastics dropped 7.2% to $5.52 billion, missing the FactSet consensus of $5.61 billion. In contrast, revenue from performance materials and coatings increased 2.1% to $2.243 billion, slightly surpassing the expected $2.238 billion.

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Sales in industrial intermediates and infrastructure fell 7.1% to $2.95 billion, below the FactSet consensus of $3.04 billion.

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For the second half of the year, Dow stated it aims to “continue delivering sequential earnings improvements while navigating through the slower macro environment we remain in.”

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Year to date, Dow’s stock has slipped 2.8% through Wednesday, whereas the S&P 500 index (SPX) has rallied 13.8%.

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