How DuPont Could Beat Out Monsanto and Dow Chemical

DuPont (NYSE: DD  ) will release its quarterly report on Tuesday, and the Dow component has climbed to levels not seen since the turn of the millennium. With plans for a major strategic shift, DuPont earnings should benefit from an increased emphasis on its more lucrative business prospects. But will it be able to hold off rivals Monsanto (NYSE: MON  ) and Dow Chemical (NYSE: DOW  ) as they take similar steps to boost their profits?

DuPont was founded more than two centuries ago as a gunpowder manufacturer, but the chemicals giant has reinvented itself many times throughout its history. Slowly but surely, DuPont has repositioned itself, selling off its car-paint unit to Carlyle Group for almost $5 billion last year and now looking to divest its performance chemicals business as well. By doing so, DuPont will increase the importance of its seed and agricultural chemicals segment, where it's much more exposed to competition from Monsanto and Dow Chemical among others. 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 report.

Stats on DuPont

Analyst EPS Estimate

$0.41

Change From Year-Ago EPS

28%

Revenue Estimate

$7.78 billion

Change From Year-Ago Revenue

5.2%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Can DuPont earnings grow faster than Monsanto and Dow Chemical?
Analysts in recent months have cut their near-term views for DuPont earnings, slicing a dime per share from their third-quarter estimates. But they've boosted their fourth-quarter projections by a similar amount, keeping full-year expectations unchanged. The stock has climbed 5% since mid-July.

DuPont's second-quarter earnings show the reason why it has sought to follow in Monsanto's footsteps. Revenue at its agriculture segment rose 7%, while performance chemicals saw sales drop 15%, causing its operating earnings to plunge by more than half. Weakness in key chemicals like pigment titanium dioxide looked particularly ugly compared to expected growth in bio-engineered seeds, pesticides, and other agricultural products.

DuPont's completion of its acquisition of South Africa's Pannar Seed gives the company an important competitive presence to try to hold off Monsanto. In particular, Pannar makes DuPont a big player in Africa, where corn production has become an important staple for food supplies. Monsanto has been the dominant business in Africa, but DuPont should now be able to wield influence in developing countries like Mozambique and Tanzania as well as the more-developed South African market.

Investors still have to be aware that DuPont, Dow Chemical, and Monsanto all face a pervasive perception of genetically modified organisms in the food supply as being potentially harmful. Despite benefits in fighting resistant pests and weeds from genetic modifications, many worry about the unknown long-term health impacts of eating genetically modified food.

Nevertheless, DuPont provides many other agricultural goods and services. With its Pioneer Field360 service helping with all aspects of farm management and with farm-specific weather services helping farmers understand microclimates in their fields, DuPont has poised to profit wherever it can to help the agricultural industry.

In the DuPont earnings report, watch to see how the company compares with Dow Chemical and Monsanto. DuPont has a strong opportunity to surpass its rivals if it can keep focusing on its best opportunities.

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  • Report this Comment On October 19, 2013, at 11:25 PM, funfundvierzig wrote:

    "DuPont is a great example of how your best investing approach is to choose great companies and stick with them for the long term. "

    We respectfully demur. DuPont was a "great company" in the last century, largest and most powerful chemical enterprise on the globe. In the 21st century, DuPont has shrunk and floundered with Management promising but never delivering strong growth in revenue and profits on their "transformation".

    DuPont is a pronounced laggard to Monsanto in seeds, to Syngenta in crop protection chemicals, and to Scotts MIRACLE-GRO in retail lawn and garden products.

    DuPont failed in its first major attempt to develop and commercialise a genetically-modified seed trait to compete with Monsanto (DuPont OptimumGAP). its last major "innovation" in herbicides, DuPont Imprelis, has killed hundreds of thousands of mature landscaping trees across the country, triggering tens of thousands of costly claims for losses, which we believe will ultimately total $3 billion or more.

    Even its crown jewel, DuPont AG demonstrated feeble growth during Q2 2013. The 7% growth in revenue was due mostly to price hikes, 6%, with only a weak growth of 1% in volume.

    Any hapless investor who stuck with DuPont the past 15 years has little to show for it. In May 1998, DD hit its record peak of 84. The stock trades today in the upper 50's.

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