Dear Valued Visitor,

We have noticed that you are using an ad blocker software.

Although advertisements on the web pages may degrade your experience, our business certainly depends on them and we can only keep providing you high-quality research based articles as long as we can display ads on our pages.

To view this article, you can disable your ad blocker and refresh this page or simply login.

We only allow registered users to use ad blockers. You can sign up for free by clicking here or you can login if you are already a member.

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

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.

DOWNLOAD FREE REPORT: Warren Buffett's Best Stock Picks

Let Warren Buffett, George Soros, Steve Cohen, and Daniel Loeb WORK FOR YOU.

If you want to beat the low cost index funds by 19 percentage points per year, look no further than our monthly newsletter.In this free report you can find an in-depth analysis of the performance of Warren Buffett's entire historical stock picks. We uncovered Warren Buffett's Best Stock Picks and a way to for Buffett to improve his returns by more than 4 percentage points per year.

Bonus Biotech Stock Pick: You can also find a detailed bonus biotech stock pick that we expect to return more than 50% within 12 months.
Subscribe me to Insider Monkey's Free Daily Newsletter
This is a FREE report from Insider Monkey. Credit Card is NOT required.