Dow Chemical, in the face of several large projects within the next few years, is projected to double its company earnings by 2018. Currently, the chemical company is settled at an earning rate of $3 a share, with insiders predicting an increase to $6 a share by 2018.
The company is valued at $65 billion and has assets such as a petrochemical division that handles natural gas, ethane and propane. Dow produces specialty chemicals and also has an agricultural division, which is in the process of creating genetically modified corn and soybean seeds that are expected to be available in the United States in 2015.
A large cause for the company’s success is due to its CEO Andrew Liveris and Third Point investor Daniel Loeb, who’s company invested $1.3 billion in Dow this year, and holds a 5.1% stake in the company. Loeb urged the business to split its specialty chemical business, criticizing its “poor operational track record.” Loeb put the pressure on Liveris and Dow in a May 1st letter, arguing that the business is “under-earning by at least $2.5 billion” a year.
“Dow’s integrated strategy,” Loeb wrote, “does not maximize profits.” He also states that Dow Chemical’s ‘integrated strategy’ is costing shareholders billions of dollars and executives should work harder to boost outcomes and transparency. Loeb has been recommending the company sell chemicals such as ethylene, propylene and more in the open market and less in the making of consumer products.
Loeb’s advice and partnership with Liveris seems to have made an impact. By mid-July, Dow began to report second-quarter earnings of 74 cents a share, a better outcome than they had initially predicted. As more large projects slated to take shape in the next few years, Dow will undoubtedly prove itself to be a company to watch.