DuPont Earnings: What to Expect From the Chemical Giant

DuPont has climbed on hopes that its reorganization will make it more profitable, but can it beat out its competitors? Find out here.

Jan 25, 2014 at 4:10PM

DuPont (NYSE:DD) will release its quarterly report on Tuesday, and until recently, investors saw the chemical giant as a strong play on agricultural growth. But even as it aims to concentrate even more strongly on the same agricultural products that have brought Monsanto (NYSE:MON) and Syngenta (NYSE:SYT) so much success, DuPont earnings could suffer if a new emerging-market financial crisis takes away the international growth potential that the company is counting on.

DuPont used to be a more diversified chemical company, but trends in the industry have made it clear that certain areas are much more profitable than others, at least at this point in the economic cycle. As DuPont moves forward with divesting less profitable businesses, the question for shareholders is whether its strategy will prove successful even in the face of heavy competition. 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.

Dd
Source: DuPont.

Stats on DuPont

Analyst EPS Estimate

$0.55

Change From Year-Ago EPS

400%

Revenue Estimate

$7.78 billion

Change From Year-Ago Revenue

6.2%

Earnings Beats in Past 4 Quarters

4

Source: Yahoo! Finance.

Can DuPont earnings keep soaring?
In recent months, analysts have largely stayed steady on their views about DuPont earnings. They've cut their full-year 2014 estimates by a single penny per share, but that hasn't stopped the stock from climbing another 2% since late October.

DuPont posted mixed results in its most recent quarterly report. The company beat earnings estimates by $0.04 per share, but it didn't produce as much revenue growth as investors had hoped to see. The results showed the disparity between DuPont's agricultural segment and its chemicals business, with operating earnings rising 11% in agriculture but plunging 38% in performance chemicals, due largely to falling prices in key chemicals like titanium dioxide.

That's the big reason that DuPont's board of directors authorized the company to separate its performance chemicals unit from the rest of the company. DuPont hopes that the spinoff will unlock shareholder value and make it easier for investors to choose whether they want exposure to the slower-growing chemicals business or the more higher-growth ag segment.

As a result, the most promising parts of DuPont's future appear to be coming from agriculture. Last year, the company entered cross-licensing agreements with Monsanto to allow DuPont to use some of Monsanto's crop traits, giving it broader access to key technology to keep customers from entirely jumping ship and switching to Monsanto seeds. With Monsanto having made similar agreements with Dow Chemical (NYSE:DOW), it's clear that competitors are finding ways to bolster the entire industry rather than seeking to lock out rivals from offering traits entirely.

At the same time, though, DuPont has other promising prospects. For instance, DuPont has the potential to become a more important provider of materials for the solar industry, where the rise in residential solar projects could boost demand substantially in 2014.

In the DuPont earnings report, watch to see whether the company can produce seed and other agricultural products that perform well against Monsanto, Syngenta, and Dow. With so much now at stake, DuPont can't afford to have its campaign into agriculture fall short of the ambitious expectations investors have.

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