Inflation issues returned to middle stage on Wednesday after Might’s Shopper Value Index (CPI) report confirmed that U.S. client costs have continued to soar.
Headline CPI rose 4.2% yr over yr, marking the most important annual enhance since 2023. A lot of the acceleration was pushed by increased vitality prices, with the vitality index surging 3.9% month over month and 23.5% from a yr in the past.
The most recent inflation information comes amid rising geopolitical tensions and commodity provide issues within the Center East, which have pushed vitality costs increased and reignited fears about provide chain disruptions throughout a number of industries.
Whereas rising commodity costs can strain many companies, some corporations stand to profit from the shifting panorama.
Buyers trying to capitalize on these developments could wish to think about Dow Inc. DOW) and International Companions GLP) inventory, each of which at the moment maintain spots on the coveted Zacks Rank #1 (Robust Purchase) record.
Picture Supply: U.S. Bureau of Labor Statistics
Dow: Larger Chemical Costs Might Assist Margins
Dow is among the world’s largest supplies science corporations, producing a broad vary of chemical substances, plastics, and industrial merchandise used throughout a number of industries.
Commodity disruptions within the Center East have affected world petrochemical markets by tightening provide and rising feedstock prices. Whereas increased vitality costs can create price pressures for Dow, they will additionally result in stronger pricing for most of the firm’s merchandise, significantly when world provide situations grow to be constrained.
The corporate has already been navigating a cyclical restoration in chemical markets, and any sustained enhance in commodity costs may assist enhance trade pricing dynamics. As prospects search dependable provide sources exterior of geopolitically delicate areas, main diversified producers like Dow could also be nicely positioned to seize extra demand.
Supporting the bullish narrative, analysts have grow to be very optimistic about Dow’s earnings outlook. To that time, FY26 EPS estimates have continued to soar during the last 90 days, leaping from projections that known as for an adjusted lack of -0.09 a share three months in the past to $2.54.
Plus, FY27 EPS estimates have skilled the same pattern, and Dow’s present earnings outlook has its inventory buying and selling at a beautiful 13X ahead earnings a number of whereas providing an attractive 4.21% annual dividend yield.
Picture Supply: Zacks Funding Analysis
International Companions: A Direct Beneficiary of Larger Power Costs
International Companions has a direct connection to rising vitality costs as the corporate operates a big community of gas distribution, together with retail vitality property and gas storage terminals all through the Northeast and Mid-Atlantic areas of the USA.
When geopolitical tensions disrupt crude oil and refined product markets, gas costs usually transfer increased, creating alternatives for distributors and entrepreneurs to profit from elevated volumes and favorable market situations.
Notably, Might’s CPI report confirmed a 7% MoM enhance in gasoline costs and a 40% surge YoY.
Center East provide issues have traditionally contributed to increased oil costs, as seen throughout the battle in Iran, boosting demand for storage, transportation, and gas distribution providers. In consequence, International Companions stands to profit from heightened volatility in vitality markets and tighter provide situations.
Making a pointy spike in GLP’s FY26 and FY27 EPS estimates extra engaging is that it trades at simply 10X ahead earnings and has a really engaging annual dividend yield of 6.35%.
Picture Supply: Zacks Funding Analysis
Extra intriguing for revenue traders is that GLP has elevated its dividend 17 instances within the final 5 years with an annualized development charge of over 7% throughout this era.
Picture Supply: Zacks Funding Analysis
Backside Line
Might’s sizzling CPI report highlighted the rising affect of upper vitality costs and commodity market disruptions. With inflation pressures resurfacing and commodity markets reacting to geopolitical developments, Dow Inc. and International Companions could also be nicely positioned to navigate the present macroeconomic setting.
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This text initially printed on Zacks Funding Analysis (zacks.com).
The views and opinions expressed herein are the views and opinions of the writer and don’t essentially mirror these of Nasdaq, Inc.
