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Will Nat-Gas Hikes Hurt The Dow Chemical Company (DOW) Earnings?

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The Dow Chemical Company (NYSE:DOW) will release its quarterly report on Thursday, and investors are hoping that the chemical giant will be able to break out of a long malaise in its stock price by posting good news. Yet while analysts see good things coming in the The Dow Chemical Company (NYSE:DOW) earnings report, the longer-term question is how much natural gas will play a role in determining its growth potential in future years.

The Dow Chemical Company (NYSE:DOW)Like its biggest peers, The Dow Chemical Company (NYSE:DOW) has diversified beyond pure chemical production to include agricultural products, although it still makes a relatively minor part of its business. As a result, The Dow Chemical Company (NYSE:DOW) remains much more exposed to conditions in the energy markets, which define a substantial portion of its costs. Let’s take an early look at what’s been happening with The Dow Chemical Company (NYSE:DOW) over the past quarter and what we’re likely to see in its quarterly report.

Stats on Dow Chemical

Analyst EPS Estimate $0.63
Change From Year-Ago EPS 14.5%
Revenue Estimate $14.48 billion
Change From Year-Ago Revenue (0.2%)
Earnings Beats in Past Four Quarters 2

Source: Yahoo! Finance.

Can Dow Chemical earnings pick up the pace this quarter?
In recent months, analysts have marked down their views on short-term The Dow Chemical Company (NYSE:DOW) earnings, cutting their June-quarter estimates by about 10%. Longer-term views are more mixed, with slight boosts in full-year 2013 estimates offset by declines in 2014 calls, but the stock has ignored the potential problems and risen 15% since mid-April.

Dow has done a good job of realigning its business to take advantage of changing conditions in the chemical industry. Over the past four years, the company has sold off non-core operations that contributed a total of $8 billion toward revenue before being sold. Instead, the company has focused largely on agricultural sciences, which saw a 14% increase in sales for the division in the first quarter, leading Dow’s six divisions in growth and helping contribute to 13% earnings growth.

That’s consistent with what we’ve seen at Dow’s rivals. Monsanto Company (NYSE:MON) has evolved to become primarily dependent on agriculture for its financial success. Even E I Du Pont De Nemours And Co (NYSE:DD), which still gets half its revenue from non-agricultural sources, is feeling the pressure to move more toward the high-margin business, having announced earlier today plans to seek strategic alternatives for its performance chemicals division.

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