We recently compiled a list of the 10 Best Plastics and Rubber Stocks to Buy According to Analysts. In this article, we are going to take a look at where Dow Inc. (NYSE:DOW) stands against the other best plastics and rubber stocks to buy according to analysts.
According to the U.S. Bureau of Labor Statistics, a crucial component of the manufacturing industry, the Plastics and Rubber Products Manufacturing subsector produces commodities by processing raw rubber and plastic materials. Rubber Product Manufacturing and Plastics Product Manufacturing are the two primary groups that make up the industry. Since rubber is increasingly being replaced by plastics, the subsector mostly concentrates on single-material goods. First-line supervisors, team assemblers, and machine operators are important jobs in this industry. As of December 2024, the subsector employed about 718,300 people, of whom 545,300 were production and nonsupervisory workers. All employees made an average of $29.68 per hour, with production workers making $25.03. In 2023, the median yearly salary for occupations was $36,140 for hand packers and $67,440 for first-line managers.
The dynamics of the industry are reflected in workplace safety and pricing patterns. As per the aforementioned report, the subsector recorded 16 fatalities and 2.9 recordable injury cases per 100 full-time employees in 2023. As the number of enterprises steadily increased to 14,536 in Q2 2024, productivity remained a priority. While import and export price indexes showed stability in December 2024, price trends as shown by the Producer Price Index (PPI) showed a minor decline (-0.1%). By striking a balance between labor demands, safety regulations, and pricing pressures, the industry’s performance and trends highlight its importance to the economy.
According to a report by MNI, there are 13,675 businesses in the rubber and plastics industry in the United States, and their yearly sales total $553 billion. In 2023, employment increased from 846,729 to 858,177, a 1.35% growth. Public ownership is 9%, compared to 5% in manufacturing, while minority and female ownership rates are 2% and 1%, respectively. Materials are imported at a rate of 19% compared to 11% for manufacturing as a whole, while exports reach 42% of distribution, which is higher than the manufacturing average of 29%. The Midwest has 35% of manufacturers, whereas the South has 31%. This is due to the region’s close proximity to major automotive hubs like Kentucky.
The market for rubber and plastic products has expanded significantly in recent years. According to The Business Research Company, it will increase at a compound annual growth rate (CAGR) of 7.5% by 2025. The historical period saw growth due to industrialization and manufacturing expansion, automotive industry expansion, consumer goods production, medical and healthcare sector growth, and packaging industry evolution. The market for rubber and plastic products is also projected to increase significantly during the next years. It will increase at a compound annual growth rate (CAGR) of 6.5%.
Interestingly, as per the latest report, R&D expenditure in the U.S. plastics and rubber manufacturing sector doubled the national average growth rate in 2024, rising 19.4% to $3.1 billion from $2.6 billion in 2023. After a five-year downturn in which R&D investment fell by 16.2%, this represents a recovery. Driven by improvements in polymer materials, production efficiency, and sustainable product development, this sector currently ranks twelfth in terms of R&D investment increase among all sectors in the U.S.
Jordan Fazio, senior director of R&D tax credit at Source Advisors, stated:
“Investment in R&D is no longer optional but a strategic necessity to stay ahead in the competitive landscape. We’ve seen through working with national and international firms in the plastics and rubber manufacturing sector the increased importance placed on being at the forefront of technology to improve existing services and identify new innovation routes”
Overall, the investors have witnessed financial gains as the global materials industry of the broader market has grown by 4.25% since the beginning of the year and by 6.18% in the past year.
A technician operating state of the art machines manufacturing specialized packaging materials.
Methodology
We sifted through online rankings to form an initial list of 20 plastics and rubber stocks. From the resultant dataset, we chose 10 stocks with a projected upside potential of at least 15% based on analyst price targets as of January 13. The stocks are ranked according to their upside potential. We also considered hedge fund sentiment around each stock using Insider Monkey’s data for Q3 2024.
Why are we interested in the stocks that hedge funds pile into? The reason is simple: our research has shown that we can outperform the market by imitating the top stock picks of the best hedge funds. Our quarterly newsletter’s strategy selects 14 small-cap and large-cap stocks every quarter and has returned 275% since May 2014, beating its benchmark by 150 percentage points. (see more details here)
Dow Inc. (NYSE:DOW)
Upside Potential as of January 13: 29.39%
One of the biggest manufacturers of chemicals worldwide and Best Plastics Stocks, Dow Inc. (NYSE:DOW) creates essential parts for a wide variety of consumer and industrial chemical and plastic goods. The company has been in business for over 125 years, and its product line has changed. As a result of the 2019 merger of DowDuPont and the ensuing splits, the firm is now a commodity chemicals firm.
Dow Inc. (NYSE:DOW) produces a variety of plastics, sealants, adhesives, and additives for use in industrial, automotive, personal care, packaging, and building end markets. This plastics company offers investors a place in a vast and varied materials sciences portfolio that produced net sales of $39 billion in 2020.
Dow Inc. (NYSE:DOW) reported $10.88 billion in revenue for the third quarter of 2024, a 1.4% increase YoY. Volume increased by 1% over the previous year, driven by gains in Performance Materials & Coatings. Higher integrated margins in the Packaging & Specialty Plastics division were the primary driver of the $142 million annual improvement in operating EBIT. The operating cash flow was $800 million, which was $858 million less than the previous year. Higher inventory levels required to sustain sales growth and labor-related supply chain interruptions were the primary causes of this reduction. Furthermore, its free cash flow decreased to $64 million from $1.06 billion in the same quarter the previous year.
There has been significant progress on the Fort Saskatchewan Path2Zero project, with around 40% of the cracker filings finished and considerable foundation work underway. Moreover, Dow Inc. (NYSE:DOW) completed the purchase of polyethylene recycler Circulus, adding 50,000 metric tons of capacity for recycled materials yearly, and negotiated a long-term contract with Linde for a clean hydrogen supply.
Dow Inc. (NYSE:DOW) remains a great choice for income-focused investors in spite of recent setbacks. It distributed $490 million in dividends to stockholders in the most recent quarter. Furthermore, since 1912, the business has never missed a dividend payment.
Richard S. Pzena’s Pzena Investment Management was the largest stakeholder in the company among the funds in Insider Monkey’s database at the end of Q3 2024. It owns 18.95 million shares worth $1.03 billion as of Q3.
Overall, DOW ranks 3rd on our list of the best plastics and rubber stocks to buy according to analysts. While we acknowledge the potential for DOW to grow, our conviction lies in the belief that some AI stocks hold greater promise for delivering higher returns and doing so within a shorter time frame. If you are looking for an AI stock that is more promising than DOW but that trades at less than 5 times its earnings, check out our report about the cheapest AI stock.
READ NEXT: 20 Best AI Stocks To Buy Now and Complete List of 59 AI Companies Under $2 Billion in Market Cap.
Disclosure: None. This article is originally published at Insider Monkey.
