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DuPont (DD) Outlines FY17 Strategies for Agriculture Unit

Zacks Equity Research

DuPont DD recently announced plans to deliver new genetics, biotech traits and crop protection products and certain strategic priorities for the company's agriculture business segment at the Bank of America Merrill Lynch 2017 Global Agriculture and Chemicals Conference.

DuPont is focused on helping farmers in improving crop productivity amid increasing demand for grain and other food products. The company remains committed  in boosting its growth by executing expansion strategies and launching new agricultural products.

The company, at the conference, provided an update on its agriculture research pipeline. These include the launches of the Pioneer brand A-Series soybeans and DuPont Vessarya disease control as well as the regional expansions of products such as Pioneer brand hybrids with Leptra insect protection and DuPont Zorvec fungicide.

DuPont also highlighted the Qrome products that bring out the full potential of Pioneer's elite corn germplasm which provides yield protection against pests. The company recently announced the limited commercial introduction of Qrome.

The Leptra insect protection was launched in Brazil in the 2016/2017 summer season. It offers broad-spectrum above-ground insect control and is one of the fastest technology ramp ups in Pioneer history. The company anticipates Pioneer to continue being a market leader in soybeans with the launch of new A-Series soybeans – highest yielding line of soybean varieties ever.

DuPont Zorvec disease control which is expected to be launched in additional countries this year provides long-term control against oomycete diseases. DuPont Pyraxalt insecticide, which has been developed to protect rice crops in Asia, is nearing its launch in 2018. Pyraxalt insecticide is expected to set a new standard for high potency, low use rate with a favorable environmental profile.

DuPont has outperformed the Zacks categorized Chemicals-Diversified industry over the past three months. The company’s shares have rallied 9.4% over this period, compared with the industry’s gain of around 7.6% over the same period.

Revenues for the company’s agriculture segment fell 10% year over year to around $1.4 billion in the last reported quarter, partly due to the timing of seed deliveries. Segment operating loss was $19 million, a 65% year-over-year improvement, aided by favorable currency impact and benefits of cost saving actions.  

DuPont continued its positive earnings surprise streak with a beat in fourth-quarter 2016, on the back of impressive cost-reduction actions. The company recorded adjusted earnings of 51 cents per share in the reported quarter which topped the Zacks Consensus Estimate of 42 cents.

DuPont is focused on an aggressive cost-cutting strategy. Further, DuPont remains committed to introduce new higher-performing products to meet farmers’ needs. The company is also focused on maintaining a strong balance sheet and returning excess cash to shareholders.

Moreover, the proposed mega-merger with Dow Chemical DOW is expected to deliver cost synergies of around $3 billion. DuPont anticipates a charge of about 15 cents per share for transaction costs related to the merger which is expected to be completed in first-half 2017, pending regulatory approvals.

The company expects adjusted earnings for the first quarter to increase around 8% year over year owing to the cost saving initiatives and the change in timing for seed deliveries, mostly related to the southern U.S. route-to-market change in Agriculture, partly offset by an expected reduction in planted corn acres in the U.S.

E.I. du Pont de Nemours and Company Price and Consensus

E.I. du Pont de Nemours and Company Price and Consensus | E.I. du Pont de Nemours and Company Quote

DuPont currently carries a Zacks Rank #3 (Hold).

Stocks to Consider

Better-ranked companies in the chemical space include Arkema SA ARKAY, Univar Inc. UNVR and Albermale Corp. ALB.

Arkema has expected long-term growth of 12.4% and sports a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Univar has expected long-term growth of 9.4% and flaunts a Zacks Rank #1.

Albemarle has expected long-term growth of 10% and has a Zacks Rank #2 (Buy).

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