) is set to release its second-quarter 2014 results before the
opening gong on Jul 22.
In the last quarter, the chemical and industrial products giant
delivered a 1.25% negative earnings surprise as harsh winter
weather coupled with a shift in timing of seed shipments and lower
corn planted area in the Americas hit its core agriculture business
in the quarter. Costs associated with the separation of the
company's performance chemicals business also weighed on its bottom
Let's see how things are shaping up for this announcement.
Factors to Consider this Quarter
DuPont, last month, said that it sees adjusted earnings in the
second quarter to be modestly below $1.28 per share earned a year
ago. Based on that, it 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. The outlook reflects weak performance
in its agriculture business.
In the agriculture unit, 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.
Although favorable seed pricing and lower input costs should
support margins, lower-than-expected planting activities across
North America and Brazil are expected to hurt volumes for
Moreover, DuPont's performance chemicals business remains a
weak link. Demand of titanium dioxide (TiO2), which is used to
give paint and other coatings a white hue, remains
While DuPont is spinning off the struggling performance
chemicals unit (expected to close by first-half 2015),
lower-than-expected selling prices in refrigerants for mobile and
stationary applications, weak TiO2 pricing and cost related to
the separation are expected to drag earnings for the division in
the second quarter. Weak TiO2 pricing is expected to remain a
headwind in the near term.
DuPont also 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 actions to support its more
focused portfolio of businesses following the spinoff of the
performance chemicals unit.
Nevertheless, DuPont should benefit from its aggressive
cost-cutting initiatives. Meaningful cost savings from its
restructuring and productivity improvement actions are expected
to support its margins this year.
We also expect DuPont to provide some color on the market
traction of its newly launched Encirca services platform for
farmers in the U.S. Encirca, which marks an expansion to DuPont's
whole-farm decision services offerings, is expected to offer
significant opportunity in the long run and deliver annual peak
revenues of more than $500 million.
Our proven model does not conclusively show that DuPont is
likely to beat the Zacks Consensus Estimate in the second quarter.
That is because a stock needs to have both a positive
(Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for
this to happen. That is not the case here, as you will see
ESP for DuPont is 0.00%. This is because both the Most Accurate
Estimate and the Zacks Consensus Estimate are pegged at $1.18.
Zacks Rank #4 (Sell):
DuPont's Zacks Rank #4 when combined with an ESP of 0.00% makes
surprise prediction difficult. We caution against stocks with Zacks
Ranks #4 and #5 (Sell rated stocks) going into the earnings
announcement, especially when the company is seeing negative
estimate revisions momentum.
Other Stocks to Consider
Here are some other chemical stocks you may want to consider as
our model shows they have the right combination of elements to post
an earnings beat this quarter:
LyondellBasell Industries NV
) has earnings ESP of +3.13% and sports a Zacks Rank #2 (Buy). It
will report its second-quarter results on Jul 25.
) has earnings ESP of +0.92% and retains a Zacks Rank #3 (Hold). It
will report on Jul 30.
Eastman Chemical Co.
) has earnings ESP of +0.54% and holds a Zacks Rank #3 (Hold). It
will report on Jul 28.
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DU PONT (EI) DE (DD): Free Stock Analysis
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