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DuPont Makes Hay While the Sun Shines

Investors appear to be waving off growth concerns this week as U.S. stocks claw back some of last week's losses. The S&P 500 (SNPINDEX: ^GSPC  ) and the narrower, price-weighted Dow Jones Industrial Average (DJINDICES: ^DJI  ) were up 0.67% and 0.78%, respectively, at 10:05 a.m. EDT.

DuPont's got the weather on its side
Chemicals manufacturer DuPont (NYSE: DD  ) released its first-quarter results this morning, and the sun shone on its fortunes -- literally. The company recorded operating earnings-per-share of $1.56, beating the consensus estimate of $1.52, thanks to record earnings in the agriculture segment as dry weather encouraged U.S. farmers to buy its new seed and crop protection products. At $10.41 billion, revenue was exactly in line with Wall Street expectations.

Better yet, DuPont reaffirmed its guidance range for full-year 2013 operating earnings of $3.85 to $4.05 per share (unlike Caterpillar, the Dow stalwart that reported yesterday), which would represent an increase of 2% to 7% from the $3.77 per share the company earned in 2012.

The company also announced a 5% dividend increase, which will help support its robust 3.5% dividend yield. In fact, DuPont is a classic example of a blue-chip dividend-payer that has benefited from investor interest in two factors: income and quality. As a result, the shares have massively outperformed the S&P 500 since the market hit its low on March 9, 2009:

DD Total Return Price Chart

DD Total Return Price data by YCharts.

DuPont is an attractive franchise, and I would argue that this year's sale of its cyclical performance-coatings (i.e., paint) business makes it all the more so. For long-term investors, there is no problem in continuing to hold the shares at this level; nevertheless, trading at 13 times the estimate for the next 12 months' EPS, their valuation is toward the top of its recent range. Looking ahead, shareholders should expect adequate, rather than spectacular, returns.

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Read/Post Comments (2) | Recommend This Article (3)

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  • Report this Comment On April 23, 2013, at 10:28 AM, funfundvierzig wrote:

    The shares of this much shrunken and continuing to shrink conglomerate have massively underperformed the market for the entire 21st century to date. After touching a peak of 83 and change 15 years ago in May 1998, the stock has traded mostly in the forties ever since. Its dividend over 15 years has not even kept pace with the tame rate of inflation in the United States. Investors are likely to be much better off for the long-term selecting one of DuPont's superior-managed competitors, such as 3M Corp, Monsanto, or Syngenta.

    Merely the individual viewpoint of one retail investor with both long and short positions in DD...funfun..

  • Report this Comment On April 23, 2013, at 10:37 AM, funfundvierzig wrote:

    The sun did indeed shine on DuPont this morning, exposing the fundamental weaknesses in this struggling, marginally managed Delaware-based conglomerate:

    Revenues declined 7% year over year, 2012.

    Sales of 6 out of 8 DuPont business segments were DOWN or flat from the prior year.

    Earnings of 6 out of 9 named business segments were DOWN from the prior year.

    Overall operating earnings FELL 8%.

    ZERO contingency liability reserves were set aside for tens of thousands of claims in a settled Imprelis lawsuit in the U. S. District Court of Philadelphia. Why?

    In the sunlight, DuPont is anything but a robustly growing enterprise! ...funfun..

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9/30/2016 5:01 PM
^DJI $18308.15 Up +164.70 +0.91%
^GSPC $2168.27 Up +17.14 +0.80%
S&P 500 INDEX CAPS Rating: No stars
DD $66.97 Up +0.60 +0.90%
DuPont CAPS Rating: ****