DuPont de Nemours (DD) Up 5.2% Since Last Earnings Report: Can It Continue?

A month has passed since the last earnings report of DuPont de Nemours (DD). Shares have risen about 5.2% in that time, outperforming the S&P 500.

Will the recent positive trend continue leading up to its next earnings release, or will DuPont de Nemours face a recession? Before we dive into how investors and analysts have reacted as of late, let’s take a quick look at the company’s most recent earnings report in order to better understand the important catalysts.

DuPont’s earnings and revenues beat first-quarter estimates

DuPont reported profit from continuing operations of $183 million, or 41 cents per share, in the first quarter of 2024. In the same quarter last year, the company reported profit of $273 million, or 58 cents per share.

Excluding one-time items, earnings per share for the reported quarter were 79 cents, which was above the Zacks Consensus Estimate of 65 cents.

DuPont’s net sales were approximately $2.93 billion, down 3% year-over-year. This figure surpassed the Zacks Consensus Estimate of $2.82 billion. The 6% drop in organic sales was due to a 5% drop in volume and a 1% drop in price. Additionally, there was a 1% unfavorable impact from currency fluctuations, partially offset by a favorable portfolio impact of 4%.

The volume reduction was primarily due to ongoing inventory clearing in industrial companies such as water technologies, particularly in China, and medical packaging in the Safety Solutions industry. The decline was somewhat mitigated by the strong development of electronic markets.

The most important information in the segment

The company’s Electronics and Industrials segment posted net sales of $1.37 billion in the reported quarter, up 5% year-over-year. This is higher than our estimate of $1.27 billion. Organic sales decreased 2% due to reduced volumes and prices.

Semiconductor Technologies reported a 10% increase in organic sales, led by the beginning of a recovery in semiconductor demand, normalization of customer inventory levels and growing demand for OLED materials. Interconnect Solutions reported slight organic sales growth, with volumes in the mid-single digits, which were almost offset by the impact of lower transit metal prices. Meanwhile, Industrial Solutions experienced a nearly 20% decline in organic sales, primarily due to continued inventory reduction in the Kalrez parts sales channel and biopharmaceutical markets.

The Water & Protection unit reported net sales of $1.29 billion, down 11% from the prior year. This decline was mainly due to a 10% decline in volume and the unfavorable impact of currency fluctuations of 1%. Despite a year-over-year decline, the figure exceeded our estimate of $1.27 billion.

Safety Solutions has experienced a decline in organic sales over a dozen-year period, primarily due to volume declines resulting from continued inventory reduction in its sales channel, with the most significant impact being from reduced demand for medical packaging in healthcare markets. In the mid-1920s, Water Solutions experienced an organic decline in sales due to lower volumes due to distributor inventory sell-offs and weaker industrial demand in China. Shelter Solutions held steady in terms of organic sales.

The story continues

Financial

At the end of the quarter, DuPont had cash and cash equivalents of $1.93 billion, down approximately 60% year over year. Long-term debt was $7.78 billion, down approximately 0.4% year-over-year.

In the first quarter, the company generated operating cash flow from continuing operations of $493 million.

Perspectives

DuPont revised its financial forecasts for this year, increasing its net sales, operating EBITDA and adjusted EPS forecasts. The company anticipates full-year 2024 net sales of approximately $12.25 billion, operating EBITDA of approximately $2.975 billion and adjusted EPS of approximately $3.60 per share, based on the mid-term of updated guidance.

DuPont expects sequential improvement in sales and earnings in the second quarter of 2024, driven by favorable seasonal factors, continued recovery in the electronics sector, and inventory declines in distribution channels in industrial end markets such as water and medical packaging.

Looking to the second half of 2024, the company expects year-over-year sales and earnings growth, driven by the ongoing recovery in the electronics market and a return to volume growth in the Water and Protection segment.

How have estimates changed since then?

Investors have witnessed an upward trend in estimate revisions over the last month.

As a result of these changes, the consensus estimate moved by 7.74%.

VGM results

Currently, DuPont de Nemours has an average Growth Score of C, although it lags well behind its Momentum Score of F. Plotting a somewhat similar path, the stock is rated D on the value side, placing it in the bottom 40% for this investment strategy.

Overall, the company’s overall VGM score is F. If you’re not focused on one strategy, this score should interest you.

Perspectives

Estimates for the stock are trending upwards, and the scale of these revisions looks promising. It’s no surprise that DuPont de Nemours has a Zacks Rank #1 (Strong Buy). We expect an above-average rate of return on shares in the coming months.

Industry player performance

DuPont de Nemours is part of the diversified Zacks Chemical industry. Shares of Eastman Chemical (EMN) in the same industry have gained 5.1% over the past month. More than a month ago, the company published its results for the quarter ended March 2024.

In the most recent quarter, Eastman Chemical reported revenue of $2.31 billion, representing a year-over-year change of -4.2%. EPS of $1.61 in the same period compared to $1.63 a year ago.

For the current quarter, Eastman Chemical is expected to report earnings per share of $2.01, representing a +1% change from the prior-year quarter. The Zacks Consensus Estimate has remained unchanged over the past 30 days.

The overall direction and magnitude of estimate revisions translates into a Zacks Rank #3 (Hold) for Eastman Chemical. The stock also has a VGM Rating of C.

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