Yahoo Finance Here's Why You Should Hold Onto DuPont (DD) Stock for Now
DuPont de Nemours, Inc. DD is gaining from its cost and productivity actions, investment in innovation and new product development amid headwinds from weak demand across certain markets and lower nylon prices.
The company’s shares are down 20.7% year to date, compared with a 14.2% decline recorded by its industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Aiding DD?
DuPont remains focused on driving growth though innovation and new product development. 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 plans to invest roughly $900 million in R&D in 2020. New product launches are driving growth in automotive electrification and water solutions.
The company is also benefiting from cost synergy savings and productivity improvement actions. It now sees roughly $180 million of savings in 2020 from its earlier announced incremental cost actions, up from its prior expectation of $90 million. The company’s cost and productivity initiatives are expected to drive margin expansion.
Moreover, DuPont remains committed to drive cash flow and shareholder value. It looks to boost cash flow through working capital productivity and earnings growth. The company is taking actions to deliver more than $500 million of working capital improvement in 2020. It is also deferring certain capital expenditures to boost free cash flow. DuPont also expects to return roughly $900 million in dividends and $230 million in share repurchases this year.
The company, during first-quarter 2020, also strengthened its liquidity position with a $1 billion revolving credit facility. It ended the first quarter with a strong cash position of $1,748 million. With these and $1.3 billion in available commercial paper, the company has roughly $4 billion of total available liquidity.
A Few Concerns
DuPont is seeing softness across certain markets such as automotive, aerospace, industrial and oil & gas. Weakness in the automotive market (reflected by declining global automotive builds) is hurting volumes in the company’s Transportation & Industrial unit. The company is also witnessing weak demand in industrial and aerospace & defense markets due to the coronavirus outbreak. Oil and gas industry dynamics also remain challenging. Demand weakness across these end-markets may affect the company's sales in the second quarter.
Moreover, the company is facing pressure from lower nylon prices. Lower demand is contributing to weak pricing. Nylon pricing weakness is expected to hurt second-quarter sales. DuPont expects prices to be down mid-single digits year over year in the Transportation & Industrial division in the second quarter due to nylon headwinds.
The company also faces headwind from costs associated with idling of plants. DuPont is idling certain facilities, primarily in the Transportation & Industrial segment, to align its supply with market demand. Charges associated with plant idling are likely to hurt margins in the second 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 worth considering in the basic materials space include Sandstorm Gold Ltd SAND, Harmony Gold Mining Company Limited HMY and AngloGold Ashanti Limited AU.
Sandstorm Gold has a projected earnings growth rate of 55.6% for the current year. The company’s shares have rallied roughly 75% in a 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.
Harmony Gold has an expected earnings growth rate of 264.3% for the current fiscal year. The company’s shares have shot up around 138% in the past year. It presently carries a Zacks Rank #2.
AngloGold has a projected earnings growth rate of 109.9% for the current year. The company’s shares have surged around 74% in a year. It currently has a Zacks Rank #2.
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