The details

I’m talking about Dow Inc (NYSE:DOW). The company makes chemicals and materials used in everything from packaging to infrastructure. Its three main segments are Packaging & Speciality Plastics, Industrial Intermediates & Infrastructure, and Performance Materials & Coatings. In 2025, Dow generated $40bn in net sales, so this is no niche player.

The most significant catalyst behind the surge this year is the launch of the “Transform to Outperform” program from late January. Management outlined cost-cutting measures, including the elimination of approximately 4,500 jobs globally. At the same time, it’s putting a heavy focus on using AI and automation to modernise customer service and manufacturing workflows. The bottom line is that they expect it to deliver $500m in value within this year alone.

Zooming out

Despite the pop this year, the stock is only up 3% over a broader one-year time horizon. This speaks to the fact that last year, investors were left pretty fed up after the company generated a massive $2.6bn net loss. Part of this loss was due to weak demand in international markets such as Europe. This remains a risk going forward.

Yet the transformation plan has sparked such optimism that the slump in the stock has now been completely recovered. But the share price is still a long way off historical highs. It’s down 41% in the last five years.

Looking ahead, it’s hard to make a concrete call now on whether the stock will keep rallying, as a lot depends on updates on the transformation. If good news comes out in the months to come that shows it’s progressing well, I think there’s plenty of room for the stock to keep jumping.

Yet even without that element, the company could benefit from continued supply disruptions in the sector. Conflict in the Middle East is estimated to have taken roughly 15% of global polyethylene capacity offline. This supply crunch actually benefits Dow as its products become more valuable. If the situation takes a long time to resolve, it could provide a boost to earnings, even though it’s not in a sustainable way.

The bottom line

I believe the stock could be a good value pick, but I want to get more confirmation first. The Q1 results are due in a month, so I’m going to wait for them before making a decision. I know that increased volatility and uncertainty with geopolitics remain risks, but if the turnaround plan starts to yield results, the stock has large potential. Investors who agree with my viewpoint could consider adding the stock to their watchlist.

The post Up 59% this year, this S&P 500 stock is smashing the index! appeared first on The Motley Fool UK.

John Wood announced it was likely to meet the market’s growth expectations for 2013, while confirming it had won pipeline engineering contracts with Dow Chemical (NYSE: DOW.US) in the USA. Highlighting the group’s international dealings, John Wood also confirmed it had won work with Shell (LSE: RDSB) (NYSE: RDS-B.US) on a project in Iraq.

Elsewhere, the company said it was benefiting from increased activity in the US shale regions, while its work on Ichthys and Mafumeira Sul upstream projects were progressing well.

The company added:

“Looking further ahead, our strong balance sheet, market fundamentals, leading positions, and balance of opex and capex related activities position the Group well for longer term growth.”

With a market cap of £2.8bn, John Wood’s shares trade at 12 times expected earnings, and offer a prospective dividend yield of 1.8%.

Of course, whether that valuation, today’s update and the future prospects for the energy industry all combine to make shares of John Wood a ‘buy’ remains your decision.

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> Mark does not own any share mentioned in this article.

The post John Wood Group PLC Upbeat After Winning Work With Royal Dutch Shell Plc And The Dow Chemical Company appeared first on The Motley Fool UK.