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DuPont (DD) Gears Up for Q1 Earnings: What's in the Offing?

Zacks Equity Research

DuPont de Nemours, Inc. DD is scheduled to come up with its first-quarter 2020 results, before the opening bell on May 5. The company is likely to have benefited from its cost and productivity actions in the quarter. However, its results are likely to reflect the impacts of weakness across certain markets including automotive, lower nylon prices and higher manufacturing costs.

DuPont delivered a negative earnings surprise of roughly 1% in the last reported quarter. Its sales for the quarter also missed expectations. The company faced challenges from weak automotive markets in the period.

The company’s shares are down 25% year to date, compared with 25.5% decline recorded by the industry it belongs to.


 

Let’s see how things are shaping up for this announcement.

What do the Estimates Say?

DuPont, earlier this month, issued preliminary results for first-quarter 2020. The company expects adjusted earnings per share of 82-84 cents for the quarter. It also anticipates net sales of roughly $5.2 billion for the first quarter. The company also expects operating EBITDA of roughly $1.3 billion for the first quarter.

The Zacks Consensus Estimate for revenues for the first quarter for DuPont is currently pegged at $5,173 million.

The Zacks Consensus Estimate for the company’s Electronics & Imaging segment is pegged at $800 million, reflecting a 14.6% decline on a sequential comparison basis. The consensus estimate for the Safety & Construction unit stands at $1,245 million, reflecting a 0.4% sequential decline. The same for the Nutrition & Biosciences division is pegged at $1,535 million, calling for a 5.3% rise on a sequential comparison basis.

Some Factors to Watch For

Soft demand across certain markets amid the coronavirus pandemic is expected to have impacted the company’s organic sales in the first quarter. DuPont faces headwind from weak demand across some of its businesses. Softness in the automotive market is hurting volumes in North America and Europe. Demand weakness in the semiconductor market is also affecting volumes in the company’s Electronics & Imaging business unit. Weak demand in these markets is likely to have affected DuPont’s first-quarter volumes.

DuPont is also facing pressure from lower nylon prices, partly due to weak demand. Nylon pricing weakness is expected to have hurt its first-quarter sales.

Higher manufacturing costs are also likely to have affected the company’s results in the March quarter. Manufacturing headwinds (due to unplanned outages) are expected to have weighed on margins in DuPont’s Safety & Construction unit in the first quarter.

However, benefits of cost synergy savings and the company’s productivity actions are expected to get reflected on first-quarter results. The company sees $215 million of savings this year from its synergy program and previous cost actions. DuPont is also taking additional cost actions in 2020, which is expected to deliver roughly $90 million of savings. Overall, DuPont aims to deliver more than $300 million in gross cost savings this year. Additional cost and productivity improvement actions are likely to have contributed to its bottom line in the quarter to be reported.

The company is also expected to have benefited, in the March quarter, from higher demand for products used in personal protection, food & beverage, water filtration, probiotics and electronics markets.
 

DuPont de Nemours, Inc. Price and EPS Surprise

 

DuPont de Nemours, Inc. Price and EPS Surprise

DuPont de Nemours, Inc. price-eps-surprise | DuPont de Nemours, Inc. Quote

 

Zacks Model

Our proven model does not conclusively predict an earnings beat for DuPont this season. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.
 
Earnings ESP: Earnings ESP for DuPont is 0.00%. This is because both the Most Accurate Estimate and the Zacks Consensus Estimate are currently pegged at 83 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DuPont carries a Zacks Rank #3.

Stocks Poised to Beat Estimates

Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:

The Scotts Miracle-Gro Company SMG, scheduled to release earnings on May 6, has an Earnings ESP of +1.49% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Wheaton Precious Metals Corp. WPM, scheduled to release earnings on May 6, has an Earnings ESP of +2.58% and carries a Zacks Rank #2.

U.S. Silica Holdings, Inc. SLCA, scheduled to release earnings on May 1, has an Earnings ESP of +7.25% and carries a Zacks Rank #3.

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DuPont de Nemours, Inc. (DD) : Free Stock Analysis Report
 
U.S. Silica Holdings, Inc. (SLCA) : Free Stock Analysis Report
 
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