Bull of the Day: Dow Inc. (DOW)
Known for its cyclical but lucrative earnings potential, now appears to be an ideal time to buy Dow Inc. DOW) stock, which sports a Zacks Rank #1 (Strong Buy) and lands the Bull of the Day.
Dow, one of the world’s largest materials science and chemical producers, is benefiting from major disruptions in the global chemical supply chain following the closure of the Strait of Hormuz.
The commodity impact has extended well beyond crude oil, triggering a broad petrochemical supply shock that has tightened global inventories and pushed prices sharply higher.
Against this backdrop, Dow’s stock has climbed more than 70% year to date and is trading near a 52-week high of $42 a share, with the momentum suggesting the potential for further gains.
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How Dow is Benefiting from Strait of Hormuz Disruptions
1. Petrochemical prices have jumped sharply, boosting Dow’s margins
Dow’s CEO Jim Fitterling has reported that the closure immediately tightened global supplies of ethylene, polyethylene, and naphtha, driving significant price increases. Fitterling noted a 10¢ per lb increase in March, another 30¢ in April, and 20¢ more expected in May, marking the strongest pricing uplift in more than a decade.
*Higher selling prices directly support Dow’s revenue and earnings, especially in plastics and packaging materials.
2. Global supply constraints are boosting demand for U.S. exports
With Asia cut off from Middle Eastern feedstocks, U.S. producers like Dow are seeing stronger export demand, especially for polyethylene.
*The shift in trade flows increases Dow’s market share and pricing power.
3. Dow’s U.S. ethane-based production gives it a major cost advantage
Because U.S. petrochemical plants rely on ethane rather than naphtha, they are largely insulated from the feedstock shortages caused by the closure. Asian and European producers, by contrast, depend heavily on naphtha flowing through Hormuz. This has created a massive pricing gap, with the typical U.S.–Asia spread widening from under $500 per ton to over $1,200 per ton.
*This means Dow can sell into global markets at elevated prices while maintaining lower input costs, a significant competitive edge.
4. The supply shock is reshaping the industry in ways that favor Dow
The closure has forced 20% of global ethylene and petrochemical capacity offline and removed up to 40% of Asia’s naphtha supply.
*This steepens the global cost curve, meaning high-cost producers struggle while low-cost players like Dow gain a structural advantage.
5. The disruption is long-lasting — extending Dow’s pricing tailwind
Dow’s CEO estimates it will take 250-275 days to clear the backlog even after the strait reopens, with petrochemicals being among the last categories to resume normal flow.
*This implies sustained elevated prices and tight supply through at least late 2026.
Soaring EPS Revisions
EPS revisions for Dow are soaring as analysts have sharply raised forward earnings expectations following the company’s stronger-than-expected results for its fiscal third quarter last week and improved revenue forecast.
With Dow signaling a sign of operational recovery, FY26 EPS estimates have now skyrocketed to $2.37 from projections that called for an adjusted loss of $0.12 a share two months ago. Plus, FY27 EPS revisions have soared 129% in the last 60 days, from estimates of $0.75 to $1.72.
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Dow’s Attractive Valuation & Dividend Yield
Amid the compelling surge in EPS revisions, DOW is still trading at a reasonable 16X forward earnings multiple and at less than 1X forward sales.
Plus, it’s noteworthy that Dow’s top line is now expected to expand 8% in FY26, with FY27 sales projected to increase another 3% to $44.58 billion.
Even better, for income-oriented investors, Dow’s generous 3.54% annual dividend yield has provided a built-in return while waiting for the company’s earnings cycle to strengthen.
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Bottom Line
Dow Inc. looks attractive right now because earnings expectations are rising, margins are improving due to global supply tightness, and its stock is still reasonably valued with an enticing dividend yield.
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This article originally published on Zacks Investment Research (zacks.com).
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