We issued an updated research report on DuPont de Nemours, Inc. DD on Apr 9.
DuPont is gaining from its cost and productivity actions, investment in innovation and new product development amid certain headwinds including pricing pressure and a weak demand environment.
The company’s shares are down 36.5% year to date, compared with a 26.6% decline recorded by the industry.
DuPont remains focused on driving growth though innovation and new product development. New product launches are driving growth in automotive electrification and water solutions. The company’s innovation-driven investment is focused on several high-growth areas. It remains committed to drive returns from its R&D investment.
The company is also benefiting from cost synergy savings and productivity improvement actions. It achieved more than $500 million in productivity and cost synergy savings in 2019. 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. The company expects its cost actions to contribute 10 cents in its adjusted earnings per share in 2020. The company’s cost and productivity initiatives should drive margin expansion.
However, DuPont is facing pressure from lower nylon prices, partly due to weak demand. Nylon pricing weakness is expected to hurt its first-quarter 2020 sales. DuPont expects its net sales for the quarter to be down mid-single digits on a year-over-year basis factoring in soft pricing. It also expects prices to be down mid-single digits in its Transportation & Industrial division in 2020. The company sees pricing headwind of roughly $200-$250 million this year.
The company also faces challenges from weak demand across some of its businesses. Demand weakness in the semiconductor market is affecting volumes in the company’s Electronics & Imaging business unit. Moreover, softness in the automotive market is hurting volumes in North America and Europe. The company is also seeing lower demand and inventory destocking in the electronics end-market. Demand in these major markets is expected remain weak over the near term.
Higher manufacturing costs are also likely to affect the company’s margins. DuPont’s Safety & Construction unit faces manufacturing headwinds (due to unplanned outages) which are expected to weigh on margins in this business in the first quarter. Manufacturing headwinds are also likely to hurt volumes in this segment in the quarter and affect the company’s top line.
DuPont de Nemours, Inc. Price and Consensus
DuPont de Nemours, Inc. price-consensus-chart | DuPont de Nemours, Inc. Quote
Zacks Rank & Stocks to Consider
DuPont currently carries a Zacks Rank #3 (Hold).
Better-ranked stocks worth considering in the basic materials space are The Scotts Miracle-Gro Company SMG, NovaGold Resources Inc. NG and Newmont Corporation NEM.
Scotts Miracle-Gro has an expected earnings growth rate of 15.9% for the current fiscal year. The company’s shares have gained roughly 37% in the past year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
NovaGold has a projected earnings growth rate of 11.1% for the current year. It currently carries a Zacks Rank #2. The company’s shares have surged roughly 131% in a year.
Newmont has a projected earnings growth rate of 90.2% for the current year. The company’s shares have rallied around 58% in a year. It currently has a Zacks Rank #2.
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