DuPont's (DD) Q1 Earnings, Revenues Trump Estimates
DuPont DD kept its positive earnings surprise streak alive with a solid beat in first-quarter 2017, supported by higher sales, healthy earnings gains in its agriculture business and benefits of its cost-reduction actions.
The Delaware-based company recorded adjusted earnings of $1.64 per share in the reported quarter, up 30% from $1.26 per share a year ago. The results topped the Zacks Consensus Estimate of $1.38.
On a reported basis, DuPont posted earnings from continuing operations of $1.52 per share for the quarter, a 9% increase from $1.39 per share a year ago.
Operating margin increased around 250 basis points in the quarter, mainly on improvements across Electronics & Communications, Performance Materials and Agriculture units.
DuPont logged net sales of $7,743 million, up roughly 5% year over year on higher volumes and local prices. That also surpassed the Zacks Consensus Estimate of $7,539 million. Volumes rose 4% while local prices edged up 1%. The company saw higher sales in most segments in the quarter, supported by improved demand in major markets and new product launches.
E.I. du Pont de Nemours and Company Price, Consensus and EPS Surprise
E.I. du Pont de Nemours and Company Price, Consensus and EPS Surprise | E.I. du Pont de Nemours and Company Quote
Segment Review
Agriculture: Revenues rose 4% year over year to around $3.9 billion in the reported quarter. Sales benefited from changes in timing of seed deliveries. Segment operating earnings increased 12% to around $1.2 billion, aided by higher volumes and local pricing.
Electronics & Communications: Sales went up 13% year over year to $510 million in the quarter. Operating earnings for the segment surged 51% year over year to $89 million, aided by volume gains.
Industrial Biosciences: Sales rose 5% year over year to $368 million. Earnings rose 19% to $75 million as decline in CleanTech was more than offset by volume gains, improved joint venture performance and benefits of cost-saving actions.
Nutrition & Health: Sales edged down 1% year over year to $789 million. Operating earnings rose 16% to $121 million on cost reduction actions and plant productivity.
Performance Materials: Sales went up 10% year over year to around $1.4 billion. Operating earnings shot up 30% to $355 million on the back of cost savings and higher volumes.
Protection Solutions: Sales rose 2% year over year to $747 million. Operating earnings edged up 1% to $177 million as volume gains and cost savings offset raw material cost inflation, unfavorable mix and reduced plant productivity.
Financials
DuPont ended the quarter with cash and cash equivalents of roughly $3.3 billion, down around 21% year over year. Total borrowings and capital lease obligations rose around 6% year over year to roughly $10.4 billion.
Outlook
DuPont expects earnings per share (on a reported basis) for first-half 2017 of around $2.42, a decline of roughly 5% from the prior year. The guidance includes an expected charge of about 32 cents per share mainly related to the planned merger with Dow Chemical DOW.
Adjusted earnings for the first half are expected to be roughly $2.90 per share, reflecting a roughly 16% year over year increase, mainly driven by higher sales. The expected increase in sales is due to the impact of the change in timing for seed deliveries, mostly related to the southern U.S. route-to-market change in Agriculture and strength in automotive markets.
DuPont has outperformed the Zacks categorized Chemicals-Diversified industry over a year, helped by its forecast-topping earnings performance and aggressive cost-cutting initiatives. The company’s shares have gained 17.5% over this period, compared with the industry’s gain of around 11.5% over the same period.
DuPont and Dow, in Mar 2017, said that the European Commission (EC) has conditionally approved their proposed merger. The approval, which came after both companies committed to sell major portions of different businesses, is a major step toward closing the merger transaction. The approval is conditional on the companies fulfilling the commitments given to the EC in connection with the clearance. The companies expect to close the merger in Aug 2017.
DuPont, last month, struck a deal to sell part of its Crop Protection business to chemical company, FMC Corp. Moreover, DuPont agreed to buy substantially all of FMC's Health & Nutrition business. DuPont will get $1.6 billion from the transaction, reflecting the difference in the value of the assets.
DuPont is a Zacks Rank #2 (Buy).
Other Stocks to Consider
Other well-placed companies in the chemical space include The Chemours Company CC and Kronos Worldwide, Inc. KRO, both holding a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chemours has an expected long-term growth of 15.5%.
Kronos has an expected long-term growth of 5%.
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