Dow Earnings: Shares Remain Undervalued as Global Economic Slowdowns Hinder Short-Term Performance

Dow’s second-quarter performance reflected the adverse economic conditions worldwide, with total revenue down 27% year over year and down 4% sequentially. The firmwide EBITDA margin declined more than 600 basis points year over year owing to lower volumes across end markets (led by operations in Europe, the Middle East, and Africa) and lower pricing. Margins increased nearly 200 basis points sequentially, however, as a result of reduced input costs and operational efficiency gains as the firm progresses on its $1 billion cost savings initiative. We maintain our $72 fair value estimate and narrow moat rating, as we expect Dow’s performance will improve along with a global economic recovery around 2024 and beyond.