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

DuPont (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 (^DJI -0.98%) 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

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 (HUN -1.33%) and Tronox (TROX -1.36%) 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 (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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