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Manufacturing Site in St. Charles, Louisiana

Courtesy of Dow

Chemical giant


just posted its best quarter in its 120-plus year history. That’s good news for shareholders, but also great news for all investors. Commodity chemicals are, essentially, building blocks for everything else making them a good read on the health of the broader economy, which looks to be doing just fine despite renewed Covid concerns.

Still, second-quarter numbers are about the past and Covid-19 fears are creeping back into investors’ minds. The


(ticker: DOW) results, however, also show that the global economy will continue to rise, despite the Delta variant.

Dow, one of the 30 stocks in the Dow Jones Industrial Average, earned more than $2 billion, or $2.72 a share, from $13.9 billion in sales. The company also generated about $2 billion in free cash flow. All those figures exceeded Wall Street expectations. It’s simply the best quarter the company has ever posted. And the company’s business momentum doesn’t look to be slowing down at all.

Howard Ungerleider
lists three reasons things are still good. “Industrial production is up 20% year over year, but it’s not above prepandemic levels,” explains the CFO. There is more room for improvement. What’s more, he says retail inventory to sales is at a 30 year low. Stores will, eventually, have to replenish shelves. That can drive another leg of economic demand and growth. Ungerleider also points to U.S. housing starts, which increased again in May. “We are in the early innings of economic recovery.”

But there is Covid and the frightening Delta variant. “Vaccination rates are increasing around the world,” adds Ungerleider adding areas with lower vaccination rates are getting hit harder by the new variant. “In a bizarre way,” he says, the Delta problem might give new impetus for vaccinations. A fully vaccinated population has the power to put the Covid pandemic behind investors once and for all.

Dow stock is up in premarket trading, about 1.5%, in response to the solid figures. Year to date, shares have gained 10% including dividends. Not bad, but behind the stock is lagging the 17% and 15% gains of the

S&P 500


Dow Jones Industrial Average.

after dropping about 6% over the past month. Most of the year’s underperformance appears to be due to recent Covid fears.

Maybe the realization things are better than feared can help Dow stock make up that gap.

Write to allen.root@dowjones.com

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