Dow Chemical Second Quarter Earnings

July 26, 2012 -- Dow Chemical (NYSE:DOW) announced its results for the most recent quarter on July 26, 2012. Dow Chemical produces chemicals, plastic materials, agricultural, advanced materials, and other products and services, including insurance.

A business' earnings are the main determinant of its share price because earnings and the circumstances relating to them can indicate whether the business will be profitable and successful in the long run.

The Numbers: Both EPS and revenues failed to meet expectations as Dow Chemical posted 55 cents per share and revenues of $14.51 billion. Analysts were expecting 64 cents per share and revenues of $15.7 billion. Revenue fell 9.6% from the same period last year while EPS is down 34.5%. Revenue declined last quarter after shrinking 0.1% to $14.72 billion in the first quarter. Dow Chemical reported net income of $734 million during the second quarter. This is a 31.2% decline from last year. Last quarter marks the third in a row in which the company's net income has fallen. Profits declined 30% in the first quarter and 87.3% in the fourth quarter of the last fiscal year.

Management Quote: Andrew N. Liveris, Dow's chairman and chief executive officer, stated: "Sustained uncertainty in the world economy continues to present a challenging operating environment, and this quarter was no exception. Weak demand due to a slowdown in global growth drove declining prices. This, coupled with an unusually high turnaround season for Dow and a large currency effect, pressured margins in the quarter. We have all of our pre-stated levers in place and are driving a full array of efficiency and cost reduction measures - tightly managing operations to generate cash flow improvements. Dow remains intensely focused on execution - maximizing our world-leading feedstock advantage, driving operating rate improvements in our integrated portfolio, tailoring growth investments to reflect macroeconomic realities, and ensuring prudent use of cash."

A Look Back: Margins were up in the first quarter, following a drop in the previous quarter. Gross margin grew 0.4 percentage point from the year-earlier quarter to 15.9%. In the fourth quarter of the last fiscal year, the figure rose 1.2 percentage points to 16.5% from the year earlier quarter.

Looking Ahead: The outlook for the company's results in the upcoming quarter is unfavorable. The average estimate for the third quarter is 65 cents per share, down from 70 cents 90 days ago. A decreasing earning estimate is a negative sign and usually leads to a drop in the stock price. For the fiscal year, the average estimate has moved down from $2.69 a share to $2.48 over the last 90 days.