DuPont de Nemours, Inc. DD is expected to gain from its innovation-driven investment, productivity actions and the acquisitions of the Spectrum Plastics Group and Donatelle Plastics amid headwinds from weaker demand in specific businesses.
DD’s shares are up 5.7% over a year against a 9.6% decline of its industry.
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Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Productivity, Innovation & Acquisition Aid DD Stock
DuPont remains focused on driving growth through innovation and new product development. Its innovation-driven investment is focused on several high-growth areas. DD remains committed to driving returns from its R&D investment.
The company, in August 2023, completed the buyout of leading manufacturer of specialty medical devices and components, Spectrum Plastics Group from AEA Investors for $1.75 billion. The acquisition strengthens DuPont’s existing position in stable and fast-growing healthcare end markets. It is also in sync with its focus on high-growth, customer-driven innovation for the healthcare market.
The buyout of Donatelle Plastics also enhances DD’s exposure in healthcare, expanding its expertise in the medical device market segments. The acquisition introduces complementary advanced technologies and capabilities, such as medical device injection molding, liquid silicone rubber processing, precision machining, device assembly and tool building.
DuPont is also benefiting from cost synergy savings and productivity improvement actions. The benefits of its structural cost actions are expected to be realized in 2024. DD also continues to implement strategic price increases in the wake of cost inflation. These actions are likely to support its results. DuPont is also executing additional restructuring actions and expects annualized cost savings of $150 million from these measures with nearly $115 million anticipated in 2024.
DuPont, in May 2024, announced a strategic plan to separate into three distinct, publicly traded companies to unlock value for shareholders and enhance operational focus. The proposed separations of the Electronics and Water businesses will be executed in a tax-free manner for DuPont shareholders, resulting in New DuPont, Electronics and Water as independent entities. Each company will benefit from increased agility and focus within their respective industries while maintaining strong balance sheets and attractive financial profiles. All three resulting companies are anticipated to have strong balance sheets and sufficient capitalization to pursue future growth opportunities.
Weakness in Water & Industrial Businesses Ails DuPont
DD’s water business faces challenges from the slowdown in China. Its water solutions business is seeing sales moderation due to softer demand in China resulting from the downturn in the industrial economy and distributor inventory de-stocking. The de-stocking within industrial-based and water end markets and weaker water demand in China are likely to continue in the third quarter. DuPont sees sales in the Water & Protection unit to decline by low-single digits year-over-year in the third quarter.
The Industrial Solutions business is also exposed to headwinds from de-stocking within biopharma applications. Organic sales in this business declined by low-double digits year-over-year in the second quarter due to lower volumes. While DuPont is seeing a recovery lately, additional channel inventory de-stocking within its industrial-based businesses is likely to continue in the third quarter.
DuPont de Nemours, Inc. Price and Consensus
DuPont de Nemours, Inc. price-consensus-chart | DuPont de Nemours, Inc. Quote
Stocks to Consider
Better-ranked stocks in the Basic Materials space are, Hawkins, Inc. HWKN, IAMGOLD Corporation IAG and Eldorado Gold Corporation EGO, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
The Zacks Consensus Estimate for Hawkins’ current fiscal-year earnings is pegged at $4.14, indicating a rise of 15.3% from year-ago levels. The Zacks Consensus Estimate for HWKN’s current fiscal-year earnings has increased 12.8% in the past 60 days. The stock has rallied around 103% in the past year.
The consensus estimate for IAMGOLD’s current-year earnings has increased by 46.4% in the past 60 days. IAG beat the consensus estimate in each of the last four quarters with the average surprise being 200%. Its shares have shot up 111% in the past year.
The Zacks Consensus Estimate for Eldorado Gold’s current year earnings is pegged at $1.35 per share, indicating a year-over-year rise of 136.8%. EGO beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 430.3%. The company's shares have rallied roughly 69% in the past year.
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