DOW Stock Loses 27% in 6 Months: What Should Investors Do?

Core Viewpoint - Dow Inc.'s shares have significantly underperformed the market, reflecting challenges from soft demand and pricing pressures in a difficult macroeconomic environment [1][22]. Group 1: Stock Performance - Dow's shares have declined by 26.5% over the past six months, compared to a 4.4% decline in the Zacks Chemicals Diversified industry [1]. - The stock has been trading below the 200-day simple moving average since October 7, 2024, indicating a bearish trend [2]. - Over the past year, Dow's shares have fallen by 30.2%, underperforming both the industry and the S&P 500 [22]. Group 2: Demand and Pricing Challenges - The company faces weak demand in Europe and China, with lower consumer spending and soft construction and manufacturing activities impacting sales [6][7]. - Demand in the automotive sector in Europe is also weak, and inflationary pressures are affecting consumer durables and building construction [7]. - Siloxane prices in Dow's Performance Materials & Coatings unit are under pressure due to increased supply in Asia, particularly from China [8]. Group 3: Cost Pressures - Dow is experiencing higher feedstock and energy costs, with an expected $100 million headwind in the first quarter of 2025 due to these factors [9]. - Consolidated earnings are projected to decline by $200 million in the first quarter from the previous quarter, influenced by rising feedstock costs [10]. Group 4: Strategic Initiatives - Dow is focused on high-return growth projects and cost-cutting measures, aiming to save $1 billion to improve margins [11][14]. - The company has received approval for its Fort Saskatchewan Path2Zero initiative, which aims to create a net-zero emissions facility and is expected to generate $1 billion in EBITDA growth annually [12][13]. - Dow's strong balance sheet and cash flow generation support its growth investments and shareholder returns, with $2.5 billion returned to shareholders in 2024 [15]. Group 5: Financial Outlook - Earnings estimates for Dow have been revised downward over the past 60 days, indicating a challenging outlook [18]. - The stock is currently trading at a forward P/E of 17.23X, which is a modest discount compared to the industry average of 17.43X [20].