DuPont Cuts Earnings View on Weak Agriculture Sales - Analyst Blog

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Chemical giant DuPont ( DD ) has lowered its earnings forecast for second-quarter and full-year 2014 blaming weak performance in its core agriculture business, sending its shares down in extended trading yesterday.  

DuPont sees adjusted earnings in the second quarter to be modestly below $1.28 per share earned a year ago. Based on that, it has reduced its adjusted earnings guidance for 2014 to between $4.00 and $4.10 per share from $4.20 and $4.45 per share expected earlier. Analysts polled by Zacks currently expect earnings of $1.46 and $4.30 per share on an average for the second quarter and 2014, respectively. 

The DE-based company's shares slid as much as around 8% in after-hours trading yesterday on the guidance cut. 

In the agriculture business, sales of corn seeds are below the company's expectations while seed inventory write-downs are higher than what was expected earlier. While sales volumes of soybean in North America are higher than expected, it will not fully neutralize the decrease in corn volume. DuPont also noted that crop protection herbicide sales were below its expectations, mostly due to extreme winter weather.   

Moreover, DuPont said that results from its performance chemicals business the second quarter will be hurt by lower-than-expected selling prices in refrigerants for mobile and stationary applications.

DuPont also provided more color on its earlier communicated 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 in the near term through reduction of costs associated with the separation of the unit and productivity improvements across the board.

DuPont expects to take a restructuring charge of roughly $270 million (before tax), or 20 cents per share, post tax, in the second quarter associated with these redesign initiatives. The company expects to incur additional charges in future as it implements more actions. DuPont envisions these initiatives to generate at least $1 billion in savings by end-2019, two-thirds of which are expected to be realized by 2015. 

DuPont's profit for first-quarter 2014 tumbled year over year as harsh winter weather hit the company's agriculture business. Both revenues and adjusted earnings for the quarter missed Zacks Consensus Estimates. The company's performance chemicals business remained a weak spot in the quarter.

DuPont is disposing a number of assets as it is gradually shifting its focus to high growth businesses, including agriculture. The separation of the performance chemicals unit (expected to close by mid-2015) represents a big part of this strategy. 

DuPont is a Zacks Rank #4 (Sell) stock.

Other companies in the chemical space worth considering include Compass Minerals International Inc. ( CMP ), PetroLogistics LP ( PDH ) and Celanese Corporation ( CE ). While both Compass Minerals and PetroLogistics carry a Zacks Rank #1 (Strong Buy), Celanese sports a Zacks Rank #2 (Buy).


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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Earnings , Stocks

Referenced Stocks: EI , DD , CE , PDH , CMP

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