DuPont's (DD) Q3 Earnings a Penny Ahead, Profit Soars

DuPont’s (DD) profit shot up in the third quarter of 2014 on healthy earnings across its Nutrition and Health and Safety and Protection divisions, offsetting continued weakness in its core agriculture business. The company saw higher margins across five reporting segments in the quarter, aided by its cost improvement actions.

The Delaware-based chemical giant posted adjusted earnings of 54 cents per share in the reported quarter that were above 45 cents per share logged a year ago. It squeaked past the Zacks Consensus Estimate of 53 cents. Adjusted earnings exclude one-time items including charges associated with the separation of the company's performance chemicals business.

Including one-time items, DuPont recorded earnings from continuing operations of 47 cents per share in the quarter versus 28 cents per share a year ago. Consolidated net income, as reported, jumped roughly 52% year over year to $433 million or 47 cents per share from $285 million or 30 cents per share in the prior-year quarter.

DuPont’s agriculture business posted an operating loss of $55 million in the reported quarter, although an improvement from a loss of $62 million registered a year ago. The electronics unit, which supplies materials for solar panels in the photovoltaic industry, saw a 3% fall in operating earnings in the quarter. The industrial biosciences business recorded a 4% rise while performance materials posted a 1% gain. Operating earnings climbed 23% in the nutrition and health unit while safety and protection raked in an 18% gain.

DuPont’s performance chemicals division (includes the paint pigment business) remained a weak spot with operating profit falling 5% in the quarter. The company is spinning off the unit as it is gradually shifting its focus to high growth, less cyclical businesses. Separation of the business is expected to complete by mid-2015.

DuPont's net sales for the reported quarter dipped 2.9% year over year to $7,511 million, impacted by portfolio changes. Volumes rose across all business units barring agriculture which saw a decline in corn seed volumes. Sales trailed the Zacks Consensus Estimate of $7,956 million.

DuPont reaffirmed its earnings expectations for 2014. Its shares were up 1.7% in pre-market trading.

E I Du Pont De Nemours And Company - Earnings Surprise | FindTheBest

Segment Review

Agriculture: Revenues fell 4% year over year to around $1.6 billion in the reported quarter. Lower corn seed and herbicide volumes were partly offset by higher insecticide and fungicide volumes.

Electronics & Communications: Sales were down 2% to $623 million in the quarter. Operating earnings for the division fell partly due to competitive pressure.

Industrial Biosciences: Sales moved up 4% to $318 million on higher demand for enzymes for ethanol production.

Nutrition & Health: Sales rose 4% to $899 million. Productivity improvement, higher volumes, better product mix and lower input costs led to a rise in the division’s operating earnings.

Performance Chemicals: Sales fell 8% to around $1.6 billion. Operating earnings fell on lower pricing and portfolio changes.

Performance Materials: Sales were down 3% to roughly $1.6 billion. Operating earnings rose as gains from higher ethylene and polymer volumes more than offset the impact of portfolio changes.

Safety & Protection: Sales edged down 1% to $977 million. Operating earnings were driven by productivity improvement actions and lower product costs.

Financials

DuPont exited the quarter with cash and cash equivalents of roughly $4 billion, down 43% year over year. Total borrowings and capital lease obligations fell roughly 12% year over year to around $13.2 billion.

Outlook

DuPont, a Zacks Rank #4 (Sell) stock, backed its earnings guidance for 2014 and continues to see adjusted earnings per share for the year in the band of $4.00 to $4.10. The current corresponding Zacks Consensus Estimate is $4.00.

DuPont sees sluggish global economic growth in the fourth quarter coupled with currency headwind and sustained weakness in its agriculture business. However, the company expects adjusted earnings per share for the quarter to rise roughly 20% from 59 cents per share recorded a year ago.

DuPont remains committed to execute its actions to support its more focused portfolio of businesses following the spinoff of the performance chemicals unit. These initiatives are expected to deliver cost savings through reduction of costs associated with the separation of the unit and productivity improvements across the board.

DuPont’s results shed light on demand trends for chemical products across an array of industries. Its compatriot Dow Chemical (DOW), which reported third-quarter results on Oct 22, topped earnings expectations and saw its profit jump on strong results across its Performance Plastics and Electronic and Functional Materials divisions.

Among other major chemical names, Celanese (CE), which reported on Oct 20, beat earnings expectations in the third quarter. Eastman Chemical (EMN) will report after the close on Oct 30.

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