Weekly insights + SMS alerts
Dow Inc. (NYSE:DOW) had a pretty good Thursday. The chemicals giant reported third-quarter earnings and revenue that beat expectations, and the stock rose 1.48% to $30.83 by the time of publication, according to market data.
The headline numbers: adjusted earnings of 71 cents per share, topping the 64-cent consensus. Revenue climbed 13% year over year to $11.267 billion, just barely edging out the $11.266 billion analysts were looking for. When your revenue beat is that thin, you take it.
Local prices jumped 14% year over year, powered by stronger pricing in Packaging & Specialty Plastics and higher polyethylene prices across every region. Currency fluctuations were a wash year over year.
But here's the catch: sales volume actually fell 1% year over year. Softer demand in Asia Pacific and disruptions tied to the Middle East conflict put a dent in the top line. In other words, Dow sold a little less stuff but charged more for it, and that was enough to keep the growth engine running.
Operating EBITDA exceeded $1.5 billion as higher selling prices and cost reductions helped offset rising raw material and logistics expenses. Demand was a mixed bag: stronger consumer electronics and home care markets lifted Performance Materials & Coatings, but not every end market was pulling its weight.
On Thursday's earnings call, CEO Karen Carter didn't mince words. High interest rates and weakening consumer confidence are still dragging on demand for housing-related products across regions, she said, with building and construction remaining the company's weakest end market.
That's a familiar story for anyone watching the housing market. When mortgage rates stay elevated and shoppers feel uneasy, they don't rush out to buy new homes or renovate the ones they have. And when they don't build or remodel, they don't need as much of the chemicals and materials that go into those projects. Dow feels that directly.
Dow generated $1.839 billion in operating cash flow during the quarter, up $709 million from a year earlier, while free cash flow reached $1.1 billion. The company ended the quarter with roughly $14 billion in liquidity and no significant debt maturities until 2029.
It also bought back about $300 million in debt during the quarter and plans another $200 million in repurchases in the fourth quarter. Combined with its March 2027 Eurobond maturity, those moves are expected to reduce debt by approximately $1.4 billion. That's the kind of balance-sheet housekeeping investors like to see.
Packaging & Specialty Plastics was the star of the show. Revenue climbed 18% to $5.8 billion, and operating EBIT jumped by more than $385 million to approximately $585 million, helped by higher polyethylene prices, stronger margins and cost savings.
Industrial Intermediates & Infrastructure revenue rose 8% to $3.1 billion, with local prices up 16%. Operating EBIT improved by $223 million to $176 million.
Performance Materials & Coatings revenue increased 8% to $2.3 billion, while operating EBIT reached $154 million. Higher prices, stronger downstream silicones volumes and savings from the closure of the U.K. Siloxanes unit all pitched in.
Dow wrapped up its $1 billion cost-savings program for 2025 and kept restructuring its European operations under its Transform to Outperform strategy.
The company squeezed out more than $150 million in additional sequential cost-saving benefits during the third quarter. Transformation initiatives have delivered approximately $450 million in improvements year to date, including about $250 million in the quarter alone.
Working-capital improvements freed up more than $400 million in cash during the quarter, and Dow remains on track to release more than $500 million in the second half of 2026.
Looking ahead, Dow expects approximately $700 million in growth and productivity improvements this year and about $2 billion in cumulative improvements by the end of 2027.
The company has completed roughly 70% of its planned 4,500-role workforce reduction and expects to largely finish this phase by year-end. Productivity initiatives are projected to generate approximately $150 million in benefits during the second half of 2026.
For the fourth quarter, Dow expects operating EBITDA of approximately $1.5 billion, supported by about $100 million in additional cost savings and more than $100 million in lower turnaround expenses.
Management anticipates global polyethylene integrated margins will improve by approximately 2 cents per pound from third-quarter levels. The company expects broadly flat sequential earnings as higher polyethylene prices, lower turnaround spending and cost savings offset seasonal weakness. Elevated European energy costs and logistics disruptions, however, remain concerns.
Beyond the near term, Dow is expanding into higher-growth markets including artificial intelligence infrastructure, electronics, mobility and energy applications. Its closed-loop liquid cooling systems and advanced thermal fluids serve markets growing at double-digit rates, and several additional investments in silicones are expected to pay back within two to three years.
The company is also shifting production toward lower-cost facilities while exiting more expensive operations. Key moves include restarting its lowest-cost, most flexible European cracker and closing the energy-intensive Barry Siloxanes unit in the U.K.
So the story here is a familiar one for Dow: price gains and self-help are carrying the day while the housing market stays stuck. Whether lower rates eventually thaw construction demand is the big question. For now, Dow is doing what it can control, and investors seem okay with that.
Real-time alerts on price moves, news, and trading opportunities.
Join 20,000+ investors. No spam, ever.
