Will Tomorrow's DuPont Earnings Report Have More Big Surprises?

DuPont (NYSE: DD  ) is scheduled to release its quarterly earnings report tomorrow, and with its stock at its highest levels in more than a decade, investors are pleased with the company's success lately. But some recent concerns about DuPont's earnings make this quarterly report crucial for the company's future prospects, and a disappointment could set the stage for a reversal in the stock's strong performance.

DuPont's gains have outpaced those of the Dow Jones Industrials (DJINDICES: ^DJI  ) since the beginning of 2013, and over the long run, the favorable demographic trends that have encouraged greater agricultural activity have helped bolster its seed and fertilizer business. Yet the company is still sensitive to broader economic trends, and some parts of the world have seen a big slowdown that could hurt DuPont's earnings growth. Let's take an early look at what's been happening with DuPont over the past quarter and what we're likely to see in its quarterly report.

Stats on DuPont

Analyst EPS Estimate

$1.27

Change From Year-Ago EPS

(9.3%)

Revenue Estimate

$10.01 billion

Change From Year-Ago Revenue

(9.1%)

Earnings Beats in Past 4 Quarters

2

Source: Yahoo! Finance.

How did last quarter's DuPont earnings fare?
Analysts have cut their views on DuPont's earnings substantially over the past few months, reducing their June-quarter estimates by $0.13 per share and making more modest reductions to full-year 2013 and 2014 consensus figures. The stock, though, hasn't responded badly to the news, climbing more than 17% since mid-April.

DuPont has already given investors a good idea of what to expect tomorrow, having issued an earnings warning last month. The company's CFO cited cold, wet weather in North America and Europe as hurting sales in its agricultural segment and its nutrition and health division, cutting DuPont's earnings expectations for the first half of the year and guiding full-year 2013 earnings to the lower end of its previously anticipated range.

Another source of potential problems is the titanium dioxide market. DuPont has made substantial investments in boosting TiO2 production based on the extremely high demand seen a couple of years ago, but buyers stockpiled substantial amounts of the chemical in order to avoid paying ever-higher prices. DuPont joined competitors Huntsman (NYSE: HUN  ) and Tronox (NYSE: TROX  ) in implementing TiO2 price increases, with DuPont's effective July 1, but the question remains whether the paint makers that need the chemical will keep buying or continue to seek cheaper substitutes.

Still, agriculture remains the big growth area for DuPont. Rival Monsanto (NYSE: MON  ) recently reported lackluster sales in its most recent quarter, with roughly flat sales of corn and soybean seeds revealing the general malaise in the sector.

Just last week, reports surfaced that investor Nelson Peltz and his hedge fund, Trian Fund Management, had taken a large stake in DuPont. Shareholders quickly bid the stock higher, as Peltz has a reputation for unlocking shareholder value by influencing company executives to take actions that benefit investors. Whether that will happen in this case is uncertain, but the attention demonstrates that DuPont at least has promise.

In tomorrow's DuPont earnings report, see how the company responds to the Trian report. With some investors concerned about the company's relative weakness in areas like consumer electronics, DuPont needs to convince investors that its strategy is sound not only now, but for the future as well.

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Read/Post Comments (5) | Recommend This Article (2)

Comments from our Foolish Readers

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  • Report this Comment On July 22, 2013, at 2:24 PM, funfundvierzig wrote:

    Additionally, will DuPont Management come clean on the looming litigation liabilities for its colossal new product failure, tree-killing DuPont Imprelis? According to Wright & Schulte, attorneys for many of the Imprelis claimants, a settlement was reached during Q2 in April involving tens of thousands of claims in the class action in the U. S. District Court of Eastern Pennsylvania alone. In our opinion, the total ultimate tab for settling the multitudinous Imprelis claims in various state and federal courts will reach $2 billion or MORE!

    Query will DuPont's customarily secretive and evasive Management set aside and openly disclose contingency litigation reserves in Q2 for Imprelis?

    ...funfun..

  • Report this Comment On July 22, 2013, at 2:34 PM, funfundvierzig wrote:

    "Still, agriculture remains the big growth area for DuPont."

    While DuPont's PR-driven executives tout "agriculture" as the Company's crown jewel and "growth" frontier, the commercial reality is DuPont is a pronounced laggard to...

    *Monsanto in seeds, total global seed sales and biotech innovation,

    * Syngenta in crop protection chemicals,

    * Scotts Miracle-GRO, in retail lawn and garden products.

    Both Monsanto and Syngenta have enriched their long-term shareholders with far greater shareholder value appreciation and increasing dividends than the shrinking and sickly DuPont conglomerate during the 21st century to date.

    ...funfun..

  • Report this Comment On July 22, 2013, at 8:05 PM, nomofunfun wrote:

    Ah yes, leave it to the paid Monsanto shills to find ways to try to smear DuPont. Let's take the points 1-by-1:

    1. Monsanto owes Brazil's farmers circa $7 Billion for illegal license fees. Far worse than the feigned Imprelis charges

    2. All but a few hundred million in Imprelis costs will be covered by insurance. The $2 Billion number referenced here has been proven to be poppycock.

    3. Far from sickly, DuPont is trading near 21st century highs, unlike Monsanto which is fading by the day.

    Expect a BLOWOUT quarter tomorrow from superior-managed DuPont.

  • Report this Comment On July 22, 2013, at 8:07 PM, nomofunfun wrote:

    One more thing, TiO2 business is sizzling. Huge earnings again. Even the Chinese have learned the power of pricing and passing costs along to the consumers. Ellen Kullman is one heckuva CEO!

  • Report this Comment On July 22, 2013, at 10:24 PM, funfundvierzig wrote:

    Fellow FOOLS,

    Masked PR operatives and rabid supporters of DuPont Management will pull any trick to downplay and spin the colossal DuPont Imprelis fiasco. For example, it has been 26 months since the first evidence of the massive countrywide tree damage and death first appeared. Yet, DuPont in its SEC filings has not disclosed that a single dollar of reimbursement for loss has been recovered from unnamed "insurers".

    Why might that be? Many Imprelis claims cogently allege FRAUD on the part of DuPont and its officers. As a general rule of state law, states forbid insuring against loss by fraud when it is the insured engaging in fraud. According to the U. S. EPA, DuPont Management knew about the potential harm to trees, but knowingly marketed this extraordinarily toxic lawn herbicide anyway and claimed falsely Imprelis had "low impact", and was "very environmentally friendly".

    In addition, DuPont Management's disclosure in its Q1 2013 filing that Imprelis claims may total $900 million applies only to claims submitted directly to the Company for resolution in DuPont's own internal programme. Again, we repeat, no contingency litigation reserves have been set aside for what will likely be $2 billion or more in our studied estimation for settling tens of thousands of claims in state and federal courts across the land.

    Finally and incidentally, the undersigned has no connection or affiliation with Monsanto, other than owning MON shares for many profitable years. ...funfun..

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