On Oct 24, we reaffirmed our Neutral recommendation on
). While we remain encouraged by strong momentum in its
agriculture business, significant currency headwind, raw material
costs pressure and a challenging operating backdrop in Europe
keep us on the sidelines.
DuPont, on Oct 22, posted mixed third-quarter 2013 results
with adjusted earnings topping the Zacks Consensus Estimate while
sales missing the same. Consolidated profit, as reported,
rocketed year over year as healthy gains across the company's
electronics and performance materials businesses and lower tax
offset weakness in its performance chemicals unit. DuPont backed
its earnings guidance for the full year.
DuPont is witnessing strength in its agriculture business,
reflected by higher corn seeds and crop protection sales. Despite
higher input costs, the Agriculture segment saw double-digit rise
sales in the third quarter boosted by higher volume and strong
performance of the crop protection business, aided by the
company's acquisition of a majority stake in Pannar Seed (Pty)
A strong start in the North American growing season is
boosting the agriculture business. DuPont is seeing healthy
demand for its corn hybrids and expects continued strong growth
in crop protection driven by new products. DuPont has numerous
new products in its pipeline that are expected to create value
for its customers.
Moreover, DuPont is focused on an aggressive cost-cutting
strategy by reducing fixed costs, restructuring work schedules
and improving working capital productivity. The company also has
a healthy balance sheet and remains committed to boost
However, DuPont is exposed to significant currency headwinds
and higher energy and raw material costs. Given a strengthening
dollar versus most currencies, DuPont now expects negative
currency impact of 18 cents per share on its earnings for 2013,
higher than its prior-expectation of 12 to 14 cents per
DuPont's performance chemicals business was a weak spot in the
third quarter. Demand of titanium dioxide (TiO2), which is used
to give paint and other coatings a white hue, remains weak,
partly due to challenging economic conditions in Europe. Lower
TiO2 pricing hurt the results in the performance chemical
business in the third quarter. DuPont's Board recently approved
the spin off of the struggling performance chemicals unit.
Other Stocks to Consider
Other companies in the chemical industry worth considering
Air Products & Chemicals Inc.
). All of them carry a Zacks Rank #2 (Buy).
AIR PRODS & CHE (APD): Free Stock Analysis
DU PONT (EI) DE (DD): Free Stock Analysis
FMC CORP (FMC): Free Stock Analysis Report
HUNTSMAN CORP (HUN): Free Stock Analysis
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