Dow Chemical Co. (NYSE: DOW – $53.42) reported first-quarter earnings excluding non-recurring items, such as one-time legal charges related to urethane matters, of $0.89 per share, beating the consensus of $0.83 and compared to $0.84 in the year ago period. The gain was attributable in part to cost cutting that ratcheted up margins to their highest level in more than a decade. Dow plans to slash costs by $300 million this year. Of that, $90 million was cut in the first quarter alone. Sales fell to $10.703 billion from $12.370 billion, due primarily to price declines in the hydrocarbons business, but were just above the average analyst view of $10.663 billion. The chemical giant said it remains on track with its mergers with Dow Corning and DuPont & Co. The deals, due to close later this year, is the first step toward breaking the businesses into three separate companies focused on agriculture, material science and specialty products.
This equity offers worthwhile total return potential for the pull to late decade, helped by a reasonable valuation and a healthy dividend yield of 3.4%. I anticipate significant operating improvement for the company’s diversified portfolio from 2017 onward and the shares can be held in aggressive accounts pending the merger and eventual split up.