DuPont (DD) Benefits From Innovation and Spectrum Acquisition
DuPont de Nemours, Inc. DD is expected to gain from its productivity and pricing actions, innovation-driven investment and the Spectrum Plastics Group acquisition amid headwinds including demand softness in certain areas.
DuPont, which is among the prominent players in the chemical space along with Dow Inc. DOW, Eastman Chemical Company EMN and Celanese Corporation CE, is seeing sustained strength in water, automotive, aerospace and healthcare markets. It remains focused on driving growth though innovation and new product development. Its innovation-driven investment is focused on several high-growth areas. DD remains committed to drive returns from its R&D investment.
The company, in August 2023, completed the buyout of leading manufacturer of specialty medical devices and components, Spectrum Plastics Group from AEA Investors for $1.75 billion. The acquired business, with annual sales of around $500 million, has been integrated into the industrial solutions line of business within the Electronics & Industrial segment.
The acquisition strengthens DuPont’s existing position in stable and fast-growing healthcare end-markets. It is also in sync with its focus on high-growth, customer-driven innovation for the healthcare market. The addition of Spectrum is expected to boost revenues in the Electronics & Industrial segment in the third quarter.
DuPont is also benefiting from cost synergy savings and productivity improvement actions. Its structural cost actions are contributing to its bottom line. It also continues to implement strategic price increases in the wake of raw material and energy cost inflation. These actions are likely to support its results in 2023. The company is also managing its portfolio with an aim for value creation. It is divesting non-core assets to focus more on high-growth, high-margin businesses.
However, the company’s water business faces challenges from the slowdown in China. Its water solutions business is expected to see sales moderation in the second half of 2023 due to softer demand in China resulting from the slowdown in the industrial economy.
The softness in construction end-markets is also expected to impact the shelter solutions business within the Water & Protection segment in 2023. Also, customer de-stocking in shelter solutions is expected to continue through the third quarter.
While the company is seeing a recovery in Interconnect Solutions, the business is expected to continue to be impacted by reduced consumer electronics spending in the near term. Interconnect Solutions saw a 15% volume decline in the second quarter due to softer smartphone, personal computing and tablet demand.
DuPont’s move to adjust production rates is also expected to impact its top line and margins. The company is taking actions to reduce production rates in electronics to align inventory with demand. Production rate reductions are expected to be a drag on sales and operating EBITDA in the third quarter of 2023.
DuPont’s adjusted earnings of 85 cents per share for the second quarter topped the Zacks Consensus Estimate of 83 cents. The company sees net sales for 2023 to be in the range of $12,450-$12,550 million. Adjusted earnings per share for 2023 are forecast to be $3.40-$3.50. For third-quarter 2023, the company sees net sales of roughly $3,150 million. Adjusted earnings per share for the quarter are projected at roughly 84 cents.
Another prominent chemical maker, Dow reported adjusted earnings of 75 cents per share for the second quarter, which topped the Zacks Consensus Estimate of 70 cents. DOW remains focused on cost-savings actions and will continue to advance its longer-term strategic priorities as it faces a challenging macroeconomic environment in the second half of 2023.
Eastman Chemical also beat earnings estimates in the second quarter. Its adjusted earnings of $1.99 per share surpassed the Zacks Consensus Estimate of $1.95 per share. EMN anticipates that adjusted earnings per share in the second half of 2023 will be lower than the first half. It expects earnings for 2023 to be between $6.50 and $7.00 per share.
Celanese missed earnings estimates in the second quarter. Its adjusted earnings of $2.17 per share lagged the Zacks Consensus Estimate of $2.46. Celanese sees adjusted earnings in the range of $2-$2.50 per share for the third quarter of 2023.
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