DuPont Hammers the Estimates

Chemical maker DuPont (NYSE: DD  ) on Tuesday joined other major U.S. companies in reporting earnings that handily beat analysts' expectations.

For the quarter, DuPont chalked up net earnings of $376 million, or $0.40 per share, compared with the $441 million, or $0.48 per share, in the fourth quarter of 2009. However, after backing out items, the company's earnings were $0.50 per share, a healthy drubbing of the $0.32 per share that analysts had anticipated. Furthermore, at $7.4 billion, revenues were 15% higher year on year and significantly above expectations of $6.95 billion.

Looking broadly at the company's results, on the positive side are benefits from products typically used in paint for automobiles and plastics. But increased materials costs, including crude oil prices, resulted in a 15% dip in the quarter's net income. As one who believes that crude prices will continue to slowly -- albeit steadily -- work their way higher, it appears that one significant result for DuPont and its peers could be squeezed margins in future periods.

At the same time, five of the company's six operating segments posted largely volume-driven sales increases. For instance, sales of performance chemicals, which often find their way into automobile paint, increased 27% year on year. Electronics and communications climbed 44%, most of which was related to volume increases. And performance materials, whose plastics frequently are also used in automobile manufacturing, grew its sales by 32%.

For the remainder of the year, management now projects that per-share earnings will come in between $3.45 and $3.75. Those figures have been increased from prior guidance in the $3.30 to $3.60 range.

As it previously announced, the company has agreed to acquire Denmark's Danisco, an enzyme and specialty food gradients company that will increase DuPont's role in the food industry. The agreed-upon price is $5.8 billion in cash, plus the assumption of $500 million in debt, and the acquisition is expected to reduce DuPont's earnings for this year by $0.30 to $0.45 per share.

CEO Ellen Kullman summed up her company's solid quarter by noting that, "We continue to differentiate DuPont through sustainable growth, disciplined execution, and ongoing productivity coupled with science-powered innovation to address population megatrends around food, energy, and protection."

Ashland (NYSE: ASH  ) , another smaller chemical maker, turned in results on Tuesday that were flattened by higher costs. We'll know more about major trends in the industry next week when DuPont's larger rival Dow Chemical (NYSE: DOW  ) , along with smaller Eastman Chemical (NYSE: EMN  ) report their results, which in both cases are expected to increase. If I were a betting man, however, I'd wager that it'll be difficult for any of those yet to report to top expectations by the extent that DuPont did.

Do you want a terrific way to locate solid stock ideas? Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Fool contributor David Lee Smith doesn't own shares in any of the companies named above. The Motley Fool has a disclosure policy.


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  • Report this Comment On January 25, 2011, at 7:50 PM, funfundvierzig wrote:

    Investors should not succumb to the make-believe of DuPont's spinning Management to the effect Q4 2010 was a "strong finish" to a recovery year. Take a look at a key metric, PTOI, or pretax operating income.

    Half, or four of the eight business units, showed a DECLINE in PTOI year over year in Q4 2010! Those were the Company's crown jewel, AG & NUT, Safety & Protection, Pharmaceuticals and Other, which presumably includes some of the Company's questionable bio-businesses. A fifth business unit, Performance Coatings showed flat PTOI, flat as dried paint. Recall also that 2009 was an extremely weak year for DuPont.

    Investors must look behind the Teflon Curtain to come to the truth as to how this struggling old-line chemicals and materials conglomerate is really operating.

    Merely the perspective of one independently thinking retail investor...funfun..

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