Going Into Q4 Earnings, is DOW Stock a Buy, a Sell, or Hold?

Dow Inc. DOW is slated to come up with fourth-quarter 2024 results before the opening bell on Jan. 30. While DOW is expected to have benefited from its cost and productivity initiatives, soft demand due to weak global economic activities and pricing headwinds are likely to have weighed on its fourth-quarter performance.See the Zacks Earnings Calendar to stay ahead of market-making news.The Zacks Consensus Estimate for fourth-quarter earnings has been revised 28.6% downward in the past 60 days. The consensus estimate for earnings is pegged at 25 cents per share, suggesting a 41.9% year-over-year decline.  Image Source: Zacks Investment ResearchDOW surpassed the Zacks Consensus Estimate in three of the trailing four quarters and missed once. It has a trailing four-quarter earnings surprise of roughly 5.8% on average. Image Source: Zacks Investment ResearchQ4 Earnings Whispers for DOW StockOur proven model does not conclusively predict an earnings beat for DOW this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.Dow has an Earnings ESP of -13.84% and a Zacks Rank #5 (Strong Sell). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.Factors Shaping DOW’s Q4 ResultsDow is expected to have faced headwinds from demand softness in Europe and China in the quarter to be reported. Lower consumer spending amid inflationary pressures is affecting demand in Europe. Demand in Asia has been impacted by weaker demand recovery in China. The property sector remains sluggish in China, with declining new home prices. Inflationary pressures are impacting consumer durables and building and construction demand. Demand in infrastructure, including residential construction, remains weak. Dow is also seeing softness in automotive in Europe and China due to low demand. Soft conditions across these markets are likely to have impacted volumes in the fourth quarter. Dow is also being challenged by weaker prices in its Performance Materials & Coatings unit, which is likely to have weighed on the segment’s margins. The unit faces challenges from weaker siloxane prices partly due to supply additions in Asia.Nevertheless, Dow is expected to have benefited from cost-saving and productivity actions in the fourth quarter. DOW is implementing targeted actions focused on optimizing labor and purchased service costs, lowering turnaround spending and boosting productivity. The benefits of DOW’s restructuring programs are likely to be reflected in its bottom line in the to-be-reported quarter.Dow Stock’s Price Performance and ValuationDOW’s shares have tumbled 22.5% over the past year, underperforming the Zacks Chemicals Diversified industry’s 1.9% decline and the S&P 500’s increase of 24.8%. Its peers, LyondellBasell Industries N.V. LYB has lost 17.4%, while Eastman Chemical Company EMN and BASF SE BASFY have gained 11.2% and 0.7%, respectively, over the same period.DOW’s One-year Price Performance Image Source: Zacks Investment ResearchFrom a valuation standpoint, DOW is currently trading at a forward price/earnings of 15.41X, a roughly 6% discount when stacked up with the industry’s average of 16.39X. Image Source: Zacks Investment ResearchInvestment Thesis for DOW StockDOW benefits from its differentiated portfolio and low-cost feedstock positions. It remains focused on investing in attractive areas through highly accretive projects. Disciplined and balanced capital allocation priorities also support its Decarbonize and Grow strategy. Dow remains focused on maintaining cost and operational discipline. It also has a strong balance sheet and generates substantial cash flows, which allow it to fund its growth investments and drive shareholder value. Dow faces challenges from soft demand conditions triggered by elevated inflation, low consumer confidence across Europe and China, and geopolitical tensions, particularly in building and construction and durable goods markets. Elevated industry supply is also impacting siloxane prices, affecting its Performance Materials & Coatings unit.How Should Investors Play the DOW Stock?While DOW benefits from its cost and productivity actions and investment in high-return projects, it is exposed to weak demand in a challenging environment and pricing headwinds, which have led to its underperformance. This, coupled with declining earnings estimates, cast a pall on the company's prospects. Therefore, it is prudent to avoid DOW stock ahead of the earnings release until market conditions improve.5 Stocks Set to DoubleEach was handpicked by a Zacks expert as the #1 favorite stock to gain +100% or more in 2024. While not all picks can be winners, previous recommendations have soared +143.0%, +175.9%, +498.3% and +673.0%.Most of the stocks in this report are flying under Wall Street radar, which provides a great opportunity to get in on the ground floor.Today, See These 5 Potential Home Runs >>Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report Dow Inc. (DOW): Free Stock Analysis Report BASF SE (BASFY): Free Stock Analysis Report Eastman Chemical Company (EMN): Free Stock Analysis Report LyondellBasell Industries N.V. 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