Sometimes dealing with the current market can be a little like walking across a busy interstate after dark: No matter how well you negotiate your course, you just might get winged.
DuPont (NYSE: DD ) found that out on Tuesday, when it cranked out a strong earnings report, only to see the market take 4% from its share price. For the quarter, the company grew its earnings 26% from the year-ago first quarter, or 22% if you back out a charge from the prior period. Reported earnings were $1.19 billion, or $1.31 per share, versus $945 million, or $1.01 a share, in the March 2007 period. Sales were up 9% to $8.6 billion.
But the sales hike was slightly illusory. Approximately 6% came from higher local selling prices, while 5% represented currency benefit. Those figures were reduced by a 1% volume decline and another 1% reduction from the divestiture of a chemical business.
Reduced demand from U.S. housing and automotive markets resulted in operating income declines in the company's Coatings and Color Technologies and Safety and Protection segments. As in the past quarter, DuPont benefited from strength in its Agricultural and Nutrition group, which saw its sales grow by 18% and its earnings increase by 21%. That segment participated in a 25% sales expansion in emerging markets, led by Brazil, China, India, and Eastern Europe.
But perhaps most important from an investment perspective was CEO Chad Holliday's response during the company's conference call to a question about management's perspective on global economic trends during the next year:
... we don't see a significant increase in overall economic activity globally in 2009. We might be surprised on the upside ... We do see our agricultural business continuing to improve as our new products roll out. ... We'll see more traction from them in 2009. We're very encouraged about the prospects there. ... So, you put all these things together, no matter what the economic environment is, we all see some improvement in 2009.
That measured optimism obviously puts DuPont in a class with the varied likes of equipment maker Caterpillar (NYSE: CAT ) , manufacturing and technology leader Honeywell (NYSE: HON ) , transporter UPS (NYSE: UPS ) , and Mexico-based cement producer Cemex (NYSE: CX ) , all of which have cranked out solid quarters, but are at least somewhat cautionary about what lies ahead.
As to DuPont in particular, I'm inclined to watch the company carefully, based on its success in agriculture -- a global market that clearly is here to stay -- its moderate P/E, and its dividend yield in excess of 3%.
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