We have reaffirmed our Neutral recommendation on chemical
). While strong momentum in its agriculture business remains
encouraging, we prefer to be on the sidelines considering the
weakness in the performance chemicals franchise.
DuPont's second-quarter 2013 results (reported on Jul 23) was
a mixed bag with adjusted earnings beating the Zacks Consensus
Estimate while sales missing the same. Profit fell by double
digits on lower titanium dioxide (TiO2) pricing. Strength in the
agriculture business was offset by weakness across performance
chemicals and electronics franchises. DuPont announced that it
may sell the performance chemicals business.
DuPont, a Zacks Rank #3 (Hold) stock, is witnessing strength
in its agriculture business, reflected by higher corn seeds and
crop protection sales. Despite higher input costs, the
Agriculture segment delivered healthy sales in the second quarter
boosted by higher volume and strong performance of the crop
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 this year driven by new products.
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
That said, we also account for the weakness across TiO2 and
photovoltaic markets. The demand of TiO2, which is used to give
paint and other coatings a white hue, remains weak, partly due to
the challenging economic conditions in Europe. Lower TiO2 pricing
is hurting the results in the performance chemical business.
DuPont is also exposed to currency headwinds and is seeing a
decline in sales volumes across many segments. Given a
strengthening dollar versus most currencies, DuPont now expects
negative currency impact of 12 cents to 14 cents per share on its
earnings for 2013, much higher than its prior-expectation of 5
cents per share.
Other Stocks to Consider
Other companies in the chemical industry with favorable Zacks
Northern Technologies International Corp.
Cytec Industries Inc.
PPG Industries Inc.
). All of them carry a Zacks Rank #2 (Buy).
CYTEC INDS INC (CYT): Free Stock Analysis
DU PONT (EI) DE (DD): Free Stock Analysis
NORTHERN TECH (NTIC): Free Stock Analysis
PPG INDS INC (PPG): Free Stock Analysis
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