Dow: Cost Actions And Enduring Mideast Tailwinds Make Shares Attractive (Upgrade)

Dow is upgraded to "Buy" after a 20% pullback, with improved fundamentals and a 9% free cash flow yield. Q2 results showed $1.44 EPS, $12.1 billion in revenue, and $2.3 billion EBITDA, driven by strong pricing and cost reductions. Cost-cutting, resilient packaging demand, and advantaged U.S. energy costs underpin confidence in DOW's mid-cycle earnings power. DOW’s healthy balance sheet, 4.6% dividend yield, and potential for further shareholder returns support an attractive value proposition. Shares of Dow (DOW) have been a strong performer over the past year, gaining about 50%. The chemicals sector has struggled with a multiyear downturn given weak demand and persistent excess supply from China and Europe that has weakened pricing power.