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.
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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Report this Comment On January 25, 2014, at 9:19 PM, funfundvierzig wrote:
DuPont "leaders" have literally bet the farm on the farm. But investors need to keep in mind DuPont suffers from a remarkable lack of integrity and scientific competence in the agricultural arena. DuPont Chieftess, Ellen Kullman, and her TEAM over the past three years have created and delivered the biggest, most costly new product failure in 21st century corporate America:
DuPont Imprelis, is a dandelion lawn treatment, falsely, if not fraudulently marketed as "very environmentally friendly", now forced off the market by the U. S. EPA. Why? Imprelis turned out to be an extraordinarily toxic killer of hundreds of thousands of mature landscaping trees across the countryside. Hundreds of beautiful trees quickly turned brown after application of Imprelis at the prestigious DuPont Country Club in Delaware! The ultimate cost from legal claims and litigation may cost DD shareholders as much as $2 billion or more in our conservative opinion…funfun..
Report this Comment On January 25, 2014, at 9:26 PM, funfundvierzig wrote:
Last year DuPont Management begin reporting on a NON-GAAP basis, effectively hiding from EPS the towering cost for the massive DuPont Imprelis fiasco. Investors should read the fine print footnotes in the DuPont earnings announcement on Tuesday, Jan. 28, 2014, to see how much this new product disaster is denting cash flow, and stripping away resources from much needed R & D in the DuPont AG & NUT businesses. …funfun..
Report this Comment On January 26, 2014, at 12:25 AM, eyeknonothing wrote:
The $2 billiion loss is a great start. I hope Monsatan can catch up. Monsatan was just sued in Chile for mega millions, again it is a good start.
Report this Comment On January 26, 2014, at 7:22 AM, funfundvierzig wrote:
"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..."
In the 21st century to date, DuPont's mediocre Management has not been sufficiently competent in managing and making decent money in numerous businesses, pharmaceuticals, fibres and fabrics, auto finishes, vinyls, and now Teflon, TIO2, acids, refrigerants, and other chemicals. So DuPont leaders are dumping all their chemicals.
Strangely in the same time period, DuPont's superior-managed rivals, such as BASF, Eastman Chemicals, PPG, Dow Chemical, Huntsman Chemical, undsoweiter, have had no insurmountable difficulties in growing robustly and making lots of money in chemicals, basic, intermediate, and specialty.
The strategy of DuPont Senior Management: dump and run, and pretend the grass is greener in other areas already dominated by intensely-focussed global players.
In summary, it is DuPont Management, not "industry trends", who have blemished and handicapped DuPont's one-time great businesses in chemicals and chemical-related businesses such as Teflon.
Merely the opinion of one individual retail investor with no position in DD, and long MON, SYT, DOW, and HUN...funfun..
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