Motley Fool Income Investor recommendation Dow Chemical (NYSE:DOW) continues its strategic plan to prune away its non-core assets. The chemical conglomerate sold its 50% stake in UOP LLC today to Honeywell (NYSE:HON), its partner in the joint venture.

With Dow's shares hammered down 29.2% over the last six months, and hovering a bit above its 52-week low today, has the stock finally fallen into value territory?

UOP is the leading international supplier and licensor of process technology, catalysts, process plants, and consulting services to the petroleum refining, petrochemical, and gas processing industries. Given the high interest in any business related to oil and gas, now is certainly the right time for Dow to divest itself of this firm, a relatively poor fit to its overall strategy.

It even appears Dow got a good deal. Honeywell will pay $825 million for Dow's share of UOP, plus or minus half the net cash of the business at closing. With sales of $1.2 billion, the company (assuming no net cash adjustment) is selling for 1.4 times sales, roughly half again Dow's market value of .9 times sales.

In addition to narrowing its strategic focus to its Basic and Performance business, Dow can use the cash to continue its aggressive reduction of its net debt-to-capital ratio. It's fallen from 52% at the end of 2002 to 30.5% in the last reported quarter.

Investors are probably pessimistic because natural gas prices -- which bottomed out at $5.85 per million BTU's in mid-February, just before Dow hit its 52-week high -- have climbed steadily, reaching $14.55 last week. Yikes! Dow, a heavy user of natural gas, will likely see its North American operations lose some of their ability to compete with foreign producers who don't face constrained natural gas supplies and astronomical prices.

The cost of Hurricane Katrina is also hurting the company's outlook. Dow has a facility on the Mississippi River on the outskirts of New Orleans, and it has yet to give any indication of how this season's hurricanes will impact earnings. Investors are likely wondering how closures to the port of New Orleans and eventual increases in commodity prices will affect Dow's pricing strength. Analysts, who 90 days ago expected Dow to earn $1.03 for the quarter that ended last week, now see $0.79 a share.

Before writing Dow off, investors would be wise to read the company's last quarterly report. At that time, the company was able to offset raw material prices with higher product prices. It was also seeing favorable price and volume trends across almost all of its product lines. That doesn't mean Dow's pricing strength is here to stay, in all fairness. It's tied to the status of commodities markets, and I don't know where they'll be moving.

Consider this, too. Analysts, after their earnings reductions, project Dow earnings of $4.29 in 2005 and $5.45 in 2006. That prices the stock at 7.7 times forward earnings. Competitors DuPont (NYSE:DD) and BASF (NYSE:BF) are priced at 13.2 and 10.6 times forward earnings, respectively. Dow's stock may have been driven down, but for value investors, it seems things are looking up.

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Fool contributor W.D. Crotty does not own shares in any of the companies mentioned. Click here to see the Motley Fool's disclosure policy.