Inflation issues returned to heart stage on Wednesday after Might’s Client Value Index (CPI) report confirmed that U.S. shopper costs have continued to soar.
Headline CPI rose 4.2% yr over yr, marking the most important annual improve since 2023. A lot of the acceleration was pushed by greater power prices, with the power index surging 3.9% month over month and 23.5% from a yr in the past.
The newest inflation information comes amid rising geopolitical tensions and commodity provide issues within the Center East, which have pushed power costs greater and reignited fears about provide chain disruptions throughout a number of industries.
Whereas rising commodity costs can stress many companies, some corporations stand to learn from the shifting panorama.
Buyers trying to capitalize on these tendencies might need to contemplate Dow Inc. DOW) and World Companions GLP) inventory, each of which presently maintain spots on the coveted Zacks Rank #1 (Robust Purchase) record.
Picture Supply: U.S. Bureau of Labor Statistics
Dow: Greater Chemical Costs Might Assist Margins
Dow is without doubt one of the world’s largest supplies science corporations, producing a broad vary of chemical compounds, 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 growing feedstock prices. Whereas greater power costs can create price pressures for Dow, they will additionally result in stronger pricing for most of the firm’s merchandise, notably when world provide situations change into constrained.
The corporate has already been navigating a cyclical restoration in chemical markets, and any sustained improve in commodity costs might assist enhance business pricing dynamics. As prospects search dependable provide sources outdoors of geopolitically delicate areas, main diversified producers like Dow could also be effectively positioned to seize further demand.
Supporting the bullish narrative, analysts have change into very optimistic about Dow’s earnings outlook. To that time, FY26 EPS estimates have continued to soar over the past 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 an analogous pattern, and Dow’s present earnings outlook has its inventory buying and selling at a gorgeous 13X ahead earnings a number of whereas providing an attractive 4.21% annual dividend yield.
Picture Supply: Zacks Funding Analysis
World Companions: A Direct Beneficiary of Greater Power Costs
World Companions has a direct connection to rising power costs as the corporate operates a big community of gas distribution, together with retail power belongings 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 greater, creating alternatives for distributors and entrepreneurs to learn from elevated volumes and favorable market situations.
Notably, Might’s CPI report confirmed a 7% MoM improve in gasoline costs and a 40% surge YoY.
Center East provide issues have traditionally contributed to greater oil costs, as seen through the battle in Iran, boosting demand for storage, transportation, and gas distribution companies. Because of this, World Companions stands to learn from heightened volatility in power markets and tighter provide situations.
Making a pointy spike in GLP’s FY26 and FY27 EPS estimates extra enticing 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 earnings buyers 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 scorching CPI report highlighted the rising impression of upper power costs and commodity market disruptions. With inflation pressures resurfacing and commodity markets reacting to geopolitical developments, Dow Inc. and World Companions could also be effectively positioned to navigate the present macroeconomic atmosphere.
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This text initially revealed 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.
