During its fourth-quarter financial release for 2025, Dow Inc. (NYSE:DOW) announced results that underwhelmed market participants, reflecting headwinds across sales volumes and pricing affecting its chemical business. The stock declined Thursday, echoing investor concern over the company's performance and strategic responses.
On an adjusted basis, the company posted a loss of $0.34 per share, outperforming expectations marginally against the predicted $0.46 loss according to Wall Street consensus. Revenue contracted by 9% year-over-year (Y/Y) to $9.460 billion, narrowly missing analyst estimates set at $9.462 billion. This downturn reflects systemic volume decreases, falling 2% Y/Y, notably within the Packaging & Specialty Plastics division, driven primarily by lower merchant olefins sales in Europe, the Middle East, Africa, and India (EMEAI). The diminished sales in these regions can be attributed to Dow's earlier decision to idle a regional cracker, affecting supply and distribution capacity.
Accounting under Generally Accepted Accounting Principles (GAAP) revealed deeper losses with a net figure of $1.48 billion for the quarter, in stark contrast to the net loss of $35 million recorded in the same quarter prior year. Operating Earnings Before Interest and Taxes (EBIT) plummeted significantly from $454 million to $33 million, underscoring the severe earnings pressure Dow faced. Operating cash flow derived from ongoing operations fell by $513 million Y/Y to $298 million, reflecting lower profitability.
Despite these challenges, the company maintained its shareholder returns policy, disbursing $251 million in dividends during the period.
In response to persistent operational and market pressures, Dow unveiled its 'Transform to Outperform' initiative, a comprehensive plan aimed at enhancing operating EBITDA by $2 billion. The strategic framework expects that roughly two-thirds of improvements will stem from productivity enhancements, with the remaining third sourced from organic growth.
This transformational program is anticipated to generate between $1.1 billion and $1.5 billion in one-time costs. Among these, severance expenses are projected between $600 million and $800 million, affecting approximately 4,500 roles as the company restructures its workforce. Other one-time charges are estimated between $500 million and $700 million.
Segment analysis revealed diverse performance impacts:
- Packaging & Specialty Plastics recorded an 11% drop in revenue to $4.7 billion Y/Y, influenced by a 9% decline in local prices linked to softer downstream polymer prices.
- Industrial Intermediates & Infrastructure sales declined 9% Y/Y to $2.7 billion, with contraction evident across both business areas within the segment.
- Performance Materials & Coatings revenue decreased 6% Y/Y to $1.9 billion; however, operating profit improved over the prior year quarter, aided by reduced fixed costs.
Jim Fitterling, Dow's chairman and chief executive officer, reflected on the year’s accomplishments and strategic outlook, emphasizing that in 2025, Dow exceeded half of its near-term cash and cost support targets exceeding $6.5 billion. This included an accelerated realization of over $400 million in cost savings from a previously announced $1 billion program.
Fitterling stressed that by simplifying company complexity, implementing advanced technologies, and refining operational processes end-to-end, the 'Transform to Outperform' initiative is poised to deliver substantial productivity gains alongside steady growth. He emphasized the intent to fundamentally simplify Dow’s operating model to unlock breakthrough improvements company-wide.
Looking ahead, Dow forecasts first-quarter 2026 net revenue of approximately $9.40 billion, trailing the consensus estimate of $10.32 billion. This outlook suggests ongoing headwinds for the company amid a challenging market environment.