|
|
|
|
||
The Delta Variant Won't Derail the Economy. This Dow Stock's Earnings Show Why.The Delta Variant Won't Derail the Economy. This Dow Stock's Earnings Show Why.Root, Al.Barron's (Online); New York The chemical giant Dow just posted its best quarter in its 120-plus- year history. That's good news for shareholders, but also great news for all investors. Commodity chemicals are, essentially, building blocks for everything else, making them a good read on the health of the broader economy, which looks to be doing just fine despite renewed Covid concerns. Wall Street seems to be impressed. Citigroup analyst P.J. Juvekar called the results "an all round robust quarter" in a Thursday research note. Still, second-quarter numbers are about the past and Covid-19 fears are creeping back into investors' minds. The Dow (ticker: DOW) results, however, also show that the global economy will continue to rise, despite the Delta variant. Dow, one of the 30 stocks in the Dow Jones Industrial Average, earned more than $2 billion, or $2.72 a share, from $13.9 billion in sales. The company also generated about $2 billion in free cash flow. All those figures exceeded Wall Street expectations. It was simply the best quarter the company has ever posted. And the company's business momentum doesn't look to be slowing down at all. more earnings CFO Howard Ungerleider lists three reasons things are still good. "Industrial production is up 20% year over year, but it's not above prepandemic levels," explained the CFO. There is more room for improvement. What is more, he said, retail inventories are at a 30-year low relative to sales. That is positive because stores will, eventually, have to replenish their shelves. That could drive a boost in demand and bring more economic growth. Ungerleider also points to U.S. housing starts, which increased again in May. "We are in the early innings of economic recovery," he said. But there is Covid and the frightening Delta variant. "Vaccination rates are increasing around the world," said Ungerleider, noting that areas with lower vaccination rates are getting hit harder by the new variant. "In a bizarre way," he said, the Delta problem might give new impetus for vaccinations. A fully vaccinated population has the power to put the Covid pandemic behind investors once and for all. Dow stock rose in premarket trading, but fell back for a loss of about 1.7% by midday. The S&P 500 is up 0.2% and the Dow is flat. Year to date, shares have gained 9% including dividends. That isn't bad, but the stock is lagging behind the respective 17% and 15% gains of the S&P and Dow Average. It has fallen about 7% over the past month. Most of the year's underperformance appears to be due to recent Covid fears. Maybe the realization that things are better than feared can help Dow stock make up that gap. |
return to message board, top of board |