Dow Earnings: Shares Remain Undervalued as Long-Term Prospects Outweigh Near-Term Headwinds

Narrow-moat Dow reported a solid start to fiscal 2023, maintaining flat sequential revenue growth despite typical seasonal headwinds and following a strong fourth-quarter 2022. Companywide EBITDA margin expanded nearly 100 basis points to 11.4% as input cost-inflation eased and pricing improved in several end markets. The firm also recognized about $100 million in cost savings attributable to its internal cost-optimization initiative. This represents roughly 10% of the approximately $1 billion cost-outs anticipated for 2023, the majority of which will likely materialize in the second half of the year. We maintain our $72 per share fair value estimate following results.