DOW vs. DD: Which Chemical Giant Deserves a Spot in Your Portfolio?

Dow Inc. DOW and DuPont de Nemours, Inc. DD are prominent U.S.-based chemical manufacturers, producing a wide range of chemicals and materials for various industries. They share a deep-rooted history in the American chemical industry, including a high-profile merger in 2017 and subsequent separation into distinct publicly traded companies in 2019. Currently, both operate as restructured entities with diversified portfolios serving a vast array of end markets including packaging, electronics, construction, automotive and agriculture. This comparison is particularly relevant to assess which of these chemical industry leaders presents a more compelling investment opportunity in the current challenging market environment, as the industry remains mired in demand headwinds in certain markets, exacerbated by disruptions from hefty tariffs. Let’s dive deep and closely compare the fundamentals of these two major chemical makers to determine which one is a better investment option now.The Case for DowDOW benefits from its differentiated portfolio and low-cost feedstock positions. It remains focused on investing in attractive areas through highly accretive projects. While Dow has delayed the construction of the Fort Saskatchewan Path2Zero project amid heightened macroeconomic and geopolitical uncertainties, it remains focused on growth actions in attractive end markets, including pharma and home and personal care, and completing high-return incremental growth projects in cost-advantaged regions. Its new alkoxylation expansion in Seadrift, TX, is expected to be fully operational by mid-2025. Dow expects the project to contribute to earnings upside in the second half of 2025. The company is taking proactive actions amid a challenging environment that are expected to deliver roughly $6 billion in cash support. These include infrastructure asset sales, additional cost savings and reduced capital expenditures. The move is in response to the current macroeconomic challenges and to support its long-term growth targets. Dow is taking action to cut costs by $1 billion to drive margins. It expects to achieve the majority of the cost savings through reductions in direct and labor costs, including a workforce reduction of around 1,500 roles globally. Dow sees around $300 million in benefits from these actions in 2025, with full benefits expected by 2026. Dow also expects around $1 billion in capital expenditure reduction in 2025, with roughly a $600 million reduction projected through the delay in the Path2Zero project. DOW has a strong balance sheet and generates substantial cash flows, which enable it to finance its growth investments in higher-value businesses and regions, and drive shareholder value. It ended the first quarter with solid liquidity of more than $11 billion, including cash and cash equivalents of roughly $1.5 billion. DOW returned $2.5 billion to its shareholders in 2024, comprising $2 billion in dividends and $0.5 billion in share buybacks. Dow also returned $494 million to its shareholders in the first quarter through dividends. It has no substantial long-term debt maturities until 2027. DOW offers a healthy dividend yield of 9.7% at the current stock price. While DOW has a high payout ratio of 239%, its dividend is perceived to be safe and reliable, backed by strong cash flows and sound financial health.Despite these positives, DOW faces challenges from demand softness, especially in Europe. Demand in the infrastructure end market, including residential construction, remains weak. Inflationary pressures are hurting demand in consumer durables and building and construction markets. Dow sees softness in automotive in Europe due to low demand. Soft conditions across these markets are likely to weigh on volumes in the near term.  Demand is expected to remain pressured by elevated inflation, low consumer confidence in Europe, and geopolitical tensions, particularly in building and construction and durable goods markets. Weak macroeconomic conditions due to disruptions caused by tariffs are expected to affect business and consumer sentiment in the near term.Dow is also challenged by weak siloxane prices in its Performance Materials & Coatings unit. The segment continues to see siloxane pricing pressure partly due to supply additions in Asia. Lower local prices, due to sustained siloxane pricing weakness, hurt the segment’s sales in the first quarter. Siloxane prices remain under pressure due to competitive pricing pressure resulting from additional supply driven by capacity additions in China. While capacity additions have slowed lately, elevated industry supply is expected to continue impacting prices in the near term.The Case for DuPontDuPont remains focused on driving growth through innovation and new product development. Its innovation-driven investment is focused on several high-growth areas. DD remains committed to driving returns from its R&D investment.The acquisition of Spectrum Plastics Group, a leading manufacturer of specialty medical devices and components, strengthened DuPont’s position in stable and fast-growing healthcare end markets. It is also in sync with its focus on high-growth, customer-driven innovation for the healthcare market. The buyout of Donatelle Plastics also enhances DD’s exposure in healthcare, expanding its expertise in the medical device market segments. The acquisition introduces complementary advanced technologies and capabilities, such as medical device injection molding, liquid silicone rubber processing, precision machining, device assembly and tool building.DuPont is also benefiting from cost synergy savings and productivity improvement actions. The benefits of its structural cost actions are expected to be realized in 2025. DD also continues to implement strategic price increases in the wake of cost inflation. These actions are likely to support its results. DuPont is also executing additional restructuring actions and expects annualized cost savings of $150 million from these measures.The company remains focused on driving cash flow and returning value to its shareholders. It looks to boost cash flow through working capital productivity and earnings growth. Prudent working capital management allowed it to achieve transaction-adjusted free cash flow conversion of 105% in 2024. DuPont also remains committed to effective capital allocation. DD, in February 2025, raised its quarterly dividend by 8% to 41 cents per share. It paid $635 million in dividends in 2024 and expects to pay around $690 million in 2025. DuPont offers a dividend yield of 2.4% at the current stock price. Its payout ratio is 38%, with a five-year annualized dividend growth rate of roughly 7.1%.On the flip side, the company is facing headwinds in the construction markets, which are impacting sales in its IndustrialsCo segment.  In North America, uncertainties surrounding the U.S. housing market are weighing on construction. Elevated borrowing costs and inflation have taken a bite out of the residential construction industry. The weakness in the construction and automotive markets is hurting sales in the diversified industrials business. The softness in automotive is due to weak automotive build rates across the United States and Europe. Hefty costs associated with the separation of the electronics business, slated to be completed on Nov. 1, 2025, are expected to impact DuPont’s performance in 2025. The company expects costs associated with business separation to be modestly below $700 million, with the bulk of it expected in 2025. These sizable separation costs are expected to impact its margins and free cash flow conversion this year. DuPont expects free cash flow conversion in 2025 to be above 90%, reflecting a decline compared with 2024. It recorded $79 million of separation-related transaction cost payments in the first quarter.Price Performance and Valuation of DOW & DDThe DOW stock is down 29.4% year to date, while DD has lost 10.7% compared with the Zacks Chemicals Diversified industry’s decline of 15.6%. Image Source: Zacks Investment ResearchDOW is currently trading at a forward 12-month earnings multiple of 45.80. This represents a roughly 158% premium when stacked up with the industry average of 17.73X. Image Source: Zacks Investment ResearchDD is currently trading at a forward 12-month earnings multiple of 15.45, below DOW and the industry. Image Source: Zacks Investment ResearchHow the Zacks Consensus Estimate Compares for DOW & DDThe Zacks Consensus Estimate for Dow’s 2025 sales implies a year-over-year decline of 3.1%. The same for EPS suggests an 80.7% year-over-year decline. The EPS estimates for 2025 have been trending lower over the past 60 days. Image Source: Zacks Investment ResearchThe consensus estimate for DuPont’s 2025 sales and EPS implies a year-over-year rise of 2.9% and 4.9%, respectively. The EPS estimates for 2025 have been trending southward over the past 60 days. Image Source: Zacks Investment Research(Find the latest EPS estimates and surprises on Zacks Earnings Calendar.)DOW or DD: Which Stock Holds the Edge?While DOW benefits from its cost and productivity actions and investment in high-return projects, it is exposed to weak demand in a challenging environment as well as pricing headwinds, which have led to its underperformance. DuPont gains on its innovation-driven investment, productivity actions and the Spectrum Plastics acquisition amid headwinds from demand weakness in its industrials business and sizable separation costs. DD appears to have an edge over DOW due to its more attractive valuation. In addition, DD's positive earnings growth projections and healthy dividend growth rate suggest that it may offer better investment prospects in the current market environment. DOW currently carries a Zacks Rank #4 (Sell), whereas DD has a Zacks Rank #3 (Hold). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. Zacks' Research Chief Names "Stock Most Likely to Double"Our team of experts has just released the 5 stocks with the greatest probability of gaining +100% or more in the coming months. Of those 5, Director of Research Sheraz Mian highlights the one stock set to climb highest.This top pick is among the most innovative financial firms. With a fast-growing customer base (already 50+ million) and a diverse set of cutting edge solutions, this stock is poised for big gains. Of course, all our elite picks aren’t winners but this one could far surpass earlier Zacks’ Stocks Set to Double like Nano-X Imaging which shot up +129.6% in little more than 9 months.Free: See Our Top Stock And 4 Runners UpWant the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report DuPont de Nemours, Inc. (DD): Free Stock Analysis Report Dow Inc. (DOW): Free Stock Analysis ReportThis article originally published on Zacks Investment Research (zacks.com).Zacks Investment ResearchWeiter zum vollständigen Artikel bei Zacks Weiter zum vollständigen Artikel bei Zacks