Chemical and industrial products behemoth
E. I. du Pont de Nemours and Company
) announced that its board of directors has approved a $1 billion
share repurchase program. The new buyback program will be backed
by the proceeds from the divestiture of the company's Performance
Coating business. It will be completed in 2013.
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The company struck a deal with private equity firm Carlyle Group
to divest its performance coatings business for $4.9 billion in
cash. The transaction is expected to be closed by the first
quarter of 2013, subject to necessary approvals.
DuPont intends to sell the business to better focus on accretive
businesses including agriculture and nutrition, bio-based
industrials, and advanced materials. These businesses are
expected to provide higher growth and margins over the long term
and help achieve the company's target of compound annual growth
rate of 12%.
Du Pont also revised its earnings outlook for 2012. The company
now expects earnings from continuing operations to be at the
higher end of the earlier guidance of $3.25 to $3.30 per share,
excluding significant items.
DuPont also provided its outlook for 2013. The company expects
earnings to increase in the low- to mid-single digits range and
sales in the low-single digits. All the segments of the company
are expected to perform well, except the Performance Chemicals
segment, whose margins are expected to go down by six to seven
percentage points. Excluding the negative impact of the chemicals
division, earnings are expected to increase in the high-teens.
In October 2012, DuPont released its third quarter 2012 results.
The company reported adjusted earnings from continuing operations
(excluding the divestiture of Performance Coatings business) of
32 cents per share, down from the year-ago earnings of 60 cents.
The results missed the Zacks Consensus Estimate of 46 cents.
Including one-time items, the company posted a loss from
continuing operations of 5 cents per share compared with earnings
of 39 cents in the prior-year quarter.
Net sales from continuing operations declined 9% year over year
to $7.4 billion, due to lower sales volumes, unfavorable currency
and negative impact from portfolio changes, partly offset by
higher prices. Sales missed the Zacks Consensus Estimate of $8.1
billion. The company witnessed lower sales volumes from the
Electronics & Communications and Performance Chemicals
businesses, especially in Asia Pacific.
DuPont, which competes with
The Dow Chemical Company
), currently holds a short-term Zacks #4 Rank, which translates
into a short-term (1 to 3 months) Sell rating. Currently, we have
a long-term (more than 6 months) Underperform recommendation on
the shares of DuPont.