DuPont's (DD) Q3 Earnings Top Estimates, Ups FY16 EPS View

DuPontDD logged forecast-topping earnings in third-quarter 2016, supported by its aggressive cost-reduction actions. The company saw improved operating margins across its business segments in the quarter.

The Delaware-based company recorded adjusted earnings of 34 cents per share in the reported quarter, up from 13 cents per share a year ago. The results trounced the Zacks Consensus Estimate of 21 cents. Operating costs (as adjusted) fell 14% year over year in the quarter.

On a reported basis, DuPont posted earnings from continuing operations of a penny per share for the quarter, down from 14 cents per share a year ago.

DuPont raked in net sales of $4,917 million for the reported quarter, up roughly 1% year over year. That beat the Zacks Consensus Estimate of $4,879 million. A 3% increase in volumes on higher demand across performance materials, agriculture and nutrition & health businesses offset a 2% decline in prices in the quarter.

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Segment Review

Agriculture: Revenues rose 2% year over year to around $1.1 billion in the reported quarter. Segment operating loss was $189 million, a 10% year over year improvement as higher volumes, favorable currency impact and cost savings more than offset reduced local price and increased product costs.

Electronics & Communications: Sales went down 7% to $493 million in the quarter. Operating earnings for the segment rose 4% year over year to $108 million as cost savings more than offset reduced demand and sustained weakness in consumer electronics.

Industrial Biosciences: Sales went up 5% to $392 million. Earnings jumped 28% to $78 million as benefits from cost-saving actions and higher demand in bioactives and biomaterials more than offset reduced volume in CleanTech.

Nutrition & Health: Sales rose 2% to $823 million. Operating earnings shot up 32% to $135 million on volumes gains, cost reduction actions and lower product costs.

Performance Materials: Sales moved up 2% to around $1.3 billion. Operating earnings rose 17% to $371 million as cost savings, higher demand in automotive markets and lower product costs more than offset unfavorable currency impact.

Protection Solutions: Sales were flat year over year at $722 million. Operating earnings rose 11% to $162 million on the back of cost savings and higher volumes.


DuPont ended the quarter with cash and cash equivalents of roughly $4.5 billion, up around 36% year over year. Total borrowings and capital lease obligations rose around 15% year over year to roughly $11.4 billion.


DuPont raised its adjusted earnings guidance for 2016. The company now sees adjusted earnings for 2016 to rise 17% year over year to $3.25 per share, an increase from its earlier view of $3.15-$3.20 per share. The company now expects full-year earnings (on a reported basis) to be roughly $2.71 per share.

DuPont continues to expect benefit of 64 cents per share from its 2016 global cost savings and restructuring plan. Unfavorable currency impact on full-year operating earnings is expected to be 15 cents per share. Headwinds from a higher base tax rate are expected to be roughly 7 cents per share.

DuPont is taking aggressive cost-cutting actions amid a still challenging backdrop. The company remains on track to attain $1 billion in cost savings on a run-rate basis by end-2016.

DuPont is moving ahead with its planned mega-merger with Dow Chemical DOW . The companies agreed to combine their businesses in late 2015 in an all-stock deal to create a chemical titan dubbed "DowDuPont", before eventually breaking up into three independent companies through tax-free spin-offs.

The deal secured approvals from shareholders of both companies in July and is now subject to customary closing conditions including receipt of regulatory clearances. The European Commission (EC), in August, started a Phase II review for the planned merger of equals of the two companies.

The EU antitrust regulators resumed their investigation into the merger earlier this month after suspending their scrutiny in September due to lack of data. The EC is expected to complete the investigation by Feb 6, 2017.

The planned merger is projected to deliver cost synergies of around $3 billion, expected to be achieved with the first two years after the deal closure. DuPont and Dow are working constructively with regulators in key jurisdictions and expects the deal to complete in first-quarter 2017.

DuPont carries a Zacks Rank #3 (Hold).

DU PONT (EI) DE Price, Consensus and EPS Surprise

DU PONT (EI) DE Price, Consensus and EPS Surprise | DU PONT (EI) DE Quote

Stocks to Consider

Some better-ranked companies in the basic materials space include The Chemours Company CC and Celanese Corporation CE .

Chemours holds a Zacks Rank #1 (Strong Buy). The company has an expected earnings growth of 20.3% for the current year. You can see the complete list of today's Zacks #1 Rank stocks here.

Celanese has an expected earnings growth of around 9.25% for the current year. The stock carries 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 Nasdaq, Inc.

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

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