Al Root

Economically speaking, things just aren't that great. That's bad news for investors. Dow is doing a lot to manage through the difficult situation. That's better news.

Thursday, Dow reported first-quarter earnings per share of 2 cents on sales of $10.4 billion. Wall Street was looking for a loss per share of 1 cent on sales $10.2 billion, according to FactSet. A year ago, Dow reported earnings per share of 56 cents on sales of $10.8 billion.

"We remain focused on disciplined execution and increased actions to improve profitability and support cash flow," said CEO Jim Fitterling in a news release. "The significant impact of slower GDP growth and volatile market conditions on our industry underscores the importance of our proactive management and best-owner mindset."

This year is shaping up to be the third consecutive year with lower than 3% global GDP growth, points out Chief Financial Officer Jeff Tate. Slow growth has made it tough to maintain margins and generate free cash flow.

Free cash flow was negative $581 million in the quarter, wider than the negative $254 million a year ago. Free cash flow can fluctuate from quarter to quarter, depending on things such as capital spending and business seasonality.

Along with earnings, Dow announced a bevy of actions including cost savings, asset sales, and capital spending cuts that should save $6 billion with 80% of the savings delivered in 2025. Capital spending this year should drop to about $2.5 billion, down from prior expectations for $3.5 billion. Assets sales will bring in $2.4 billion shortly.

The extra cash will help defend the dividend, which remains a priority for the company, says Tate. Dow pays out almost $500 million per quarter, resulting in a yield of almost 10%. A yield that high may indicate that investors are nervous about the dividend, but no cuts have been announced.

Investors appear happy with first-quarter results, and Dow's conservative approach. Dow shares were up 3.5% in premarket trading at $30, while S&P 500 and Dow Jones Industrial Average futures were down 0.1% and 0.3%, respectively.

Tariffs aren't a massive issue for the company. Dow has a global footprint, and the ability to make polyethylene -- a benchmark plastic product -- on four continents.

The main impact of tariffs on the company is through slower economic growth and potential inflation keeping interest rates high. Parts of the business that are more sensitive to interest rates remain weak. Those include housing and appliances. Electronics and healthcare are relatively strong.

Coming into Thursday trading, Dow stock was down about 28% year to date. The economy has weighed on investor sentiment. The economy isn't improving yet, but Dow is doing what it can.

Write to Al Root at allen.root@dowjones.com

This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.

(END) Dow Jones Newswires

April 24, 2025 07:48 ET (11:48 GMT)

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