Update DuPont (DD)
DuPont’s fourth quarter earnings results, announced on January 24, shouldn’t have come as any surprise. (The stock is a member of my Jubak’s Picks 12-18 month portfolio http://jubakam.com/portfolios/ )
Back on the chemical company’s investment day in mid-December, DuPont had said that it saw the next few quarters as tough but that it saw a bright longer-term future thanks to its “new” businesses of nutrition and industrial bioscience. And that’s the story that fourth quarter earnings told too.
Fourth quarter earnings came in a 35 cents a share (excluding one-time items), beating Wall Street estimates by two cents a share. Revenue grew by 14% from the fourth quarter of 2010—if you count a big boost from acquisitions and currency. Excluding those two factors revenue grew by just 4%. At $8.43 billion for the quarter, revenue came in just below the Wall Street estimate of $8.53 billion.
As you might expect in the current global economy, DuPont’s sales in its consumer electronics and construction businesses were weak in the quarter. Electronics sales, for example, were down 18% year-to-year.
But the company’s newer and non-traditional (for DuPont anyway) businesses continued to do well. Read more
Update DuPont (DD)
You’re entitled to feel whiplashed by DuPont (DD) over the last week or so.
First, on December 9, DuPont announced that fourth quarter earnings would come in at 28 cents to 36 cents a share, well below the Wall Street consensus of 46 cents a share. The problem, the company said, is that customers are cutting back on orders on fears of a global economic slowdown, preferring to draw down inventories rather than risk getting caught with raw materials they don’t need. The problem has been spread across DuPont’s businesses in plastics, autos, general packaging, home building, and electronics. Europe, no surprise, is the weakest region.
Second, on December 13 at the company’s investor day, DuPont said, in effect, that Wall Street had overreacted by cutting projections for full-year 2011 earnings to $4.23 after the negative pre-announcement. For 2011 the company projected earnings of $4.20 to $4.40 a share. Cost cutting and synergies from the acquisition of Danisco–$300 million and $130 million, respectively—are materializing sooner than expected. Although the businesses the company mentioned in the December 9 preannouncement are indeed slowing, growth is more than holding up at the fast-growth industrial biosciences and nutrition and health segments. DuPont said it expected long-term annual earnings growth of 12% (at the high end of company guidance of 10% to 13% annual growth) on long-term sales growth of 8% to 10% in agriculture, 10% to 12% in industrial biosciences, and 7% to 9% in nutrition and health.
What is DuPont really telling investors? Read more
Buy DuPont (DD)
All I want is everything from a stock right now.
Can’t depend on the wider global or U.S. economy providing fuel for earnings and revenue growth so I’d like to buy shares in a company with a strong internal engine.
I certainly don’t want to take on greater than market risk—that’s quite enough on its own, thank you—so a low price-to-earnings ratio and reasonable expectations are basic requirements.
It wouldn’t hurt, as long as we’re on the subject of valuation, if investors were currently overlooking the company’s strengths or mis-characterizing it as slow and sluggish when it’s not.
A dividend yield better than the yield on 10-year Treasuries to support the share price and to give me something to squander on food and gas if I have to wait for a while before the share price goes up.
Oh, and just in case I’m being too pessimistic about the market and the switch is about to flip back to risk on from the risk off position of Monday and Tuesday of this week, I’d like these shares to show me a record that includes a big gain during the rally that stretched from October 3 to October 28.
That’s not asking for too much is it? Read more
Update DuPont (DD)
In the current slow growth economic environment I’m looking for shares of companies that can turn modest top line growth in unit volume into better than expected bottom line earnings growth.
And that’s exactly what EI DuPont (DD) reported on July 28 for its second quarter of 2011. Earnings of $1.37 a share were 2 cents a share above consensus and revenue climbed 19% from the second quarter of 2010 to $10.26 billion, above the Wall Street estimate of $9.9 billion.
But to see what I mean look at how DuPont got that 19% increase in revenue. Just 2 percentage points came from higher volumes while a whopping 11 percentage points came from higher local prices. (Exchange rates and a shift in the company’s sales mix toward higher margin products account for the rest of the revenue gain.)
This was true in business segment after business segment and most importantly for investors looking beyond the current quarter in DuPont’s performance coatings—known to you and me as auto paints—unit. Sales in that segment rose 15% from the second quarter of 2010. Of that 1 percentage point came from higher volumes and 14% from higher prices.
Why is that important? Read more
(Finally) why I added DuPont to my long-term portfolio back in January–and why I’d still buy it today
This isn’t your parents’ chemical company anymore.
For example, EI du Pont de Nemours (DD), DuPont to its friends, got 28% of its sales in 2010 from its agriculture and nutrition segment. (That percentage will go up once DuPont integrates its acquisition of Danisco, the world’s second largest producer of enzymes for biofuels and foods in 2012.) Of that 59% comes from Pioneer Hi-Bred, the world’s largest seed company.
Another big hunk of sales come from what I’d called advanced materials. For example, 10% of sales in 2010 came from electronics, advanced display, and photovoltaic products. Another 20% of sales fall into the performance materials unit that produces such things as engineering and industrial polymers. Safety and protection fibers such as the Kevlar account for 10%.
And where DuPont is still in what I’d call the traditional chemical business the company has been very good at picking its spots. Read more
