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Why Shares of DuPont Fell Today

By Lou Whiteman - Updated Jan 30, 2020 at 5:04PM

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The first quarter is going to be weaker than expected.

What happened

Shares of DuPont de Nemours (DD) fell more than 8% on Thursday following the chemical company's quarterly earnings report. The fourth-quarter results matched estimates, but Wall Street was disappointed by the company's guidance for the first quarter.

So what

Before markets opened on Thursday, DuPont, one of three publicly traded companies formed out of the 2019 breakup of DowDuPont, reported fourth-quarter adjusted earnings of $0.95 per share on revenue of $5.2 billion, in line with analyst expectations. Net sales were down 5% year over year due to weakness in the automotive market and a declining price for nylon.

A man in a white robe and a mask with a laptop in his hands stands near the digital screen at a factory.

Image source: Getty Images.

CEO Marc Doyle issued a statement saying that while the company has faced "challenging global macro conditions," it has "mitigated these headwinds through pricing and cost actions while continuing to strengthen our position in key growth areas such as water and 5G through continued innovation and investment."

But those headwinds didn't disappear when the calendar changed to 2020, and are expected to affect first-quarter results. DuPont said that it expects first-quarter adjusted earnings between $0.70 and $0.74 per share, well below the $1.01 consensus estimate, due to continued pressure on nylon pricing and some short-term manufacturing issues.

For the full year, DuPont expects adjusted earnings between $3.70 and $3.90 per share on revenue between $21.5 billion and $22 billion. Analysts were expecting $4.12 per share in earnings in 2020, on revenue of $21.98 billion.

Now what

The new DuPont isn't yet a year old, but the company is already splitting again. In December, it announced plans to combine its nutrition and biosciences unit with International Flavors & Fragrances (IFF -1.87%) in a deal that values the combination at about $45 billion.

DuPont chairman Ed Breen, the architect of the creation and split of DowDuPont, said the IFF deal "advances the strategic direction of the company and will generate value for our shareholders," and hinted that other transactions could follow.

"I remain focused on this aspect of DuPont's value creation opportunity, working closely with the Board to assess opportunities to unlock shareholder value through portfolio refinement and differentiated investment," Breen said.

Investors understandably tend to get more excited about proven growth stocks than they do with financial engineering. But Breen, through his history first at Tyco International and later at DuPont and DowDuPont, has proven he knows how to buy and sell assets in a way that creates shareholder value. The near term will likely be volatile, but over the long run, DuPont remains an intriguing investment idea.

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Stocks Mentioned

E. I. du Pont de Nemours and Company Stock Quote
E. I. du Pont de Nemours and Company
DD
International Flavors & Fragrances Inc. Stock Quote
International Flavors & Fragrances Inc.
IFF
$119.14 (-1.87%) $-2.27

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