E. I. du Pont de Nemours and Company (NYSE: DD)

Transcription

1 Mar 07, 2016 E. I. du Pont de Nemours and Company (NYSE: DD) $63.18 USD ( As of 03/04/16 ) Zacks Rank 3-Hold Style Scores:Growth: Value: Momentum: Data Overview 52 Week High-Low $ $ Day Average Volume 4,441,043 Beta 1.82 Market Cap B Dividend / Div Yld $1.52 / 2.41% Industry CHEM-DIVERSIFD Industry Rank 234 / 265 (Bottom 12%) Growth Score Hist. EPS Growth (3-5 yrs) -2.36% Proj. EPS Growth (F1/F0) 8.95% Curr. Cash Flow Growth % Hist. Cash Flow Growth (3-5 yrs) -2.09% Summary DuPont swung to a loss in fourth-quarter 2015 on weak results in its agriculture business, unfavorable currency swings and charges related to restructuring actions. Adjusted earnings for the quarter beat the Zacks Consensus Estimate. Revenues declined year over year on lower sales across all businesses, and missed expectations. The company expects revenue growth to be challenging in 2016 given a difficult operating backdrop. DuPont is exposed to significant currency headwinds stemming from a stronger dollar. The company also faces a challenging operating environment in the agricultural market. Nevertheless, DuPont is expected to gain from new product launches and productivity actions. Moreover, it remains committed to maximize shareholder value. Elements of the Zacks Rank Agreement Estimate Revisions (60 days) Current Ratio 1.72 Debt/Capital 42.83% 100% 50% 83% 80% Net Margin 6.85% Return on Equity 22.60% Sales/Assets 0.65 Q1 (Current Qtr) Revisions: 2 Up: 0 Down: 2 Q2 (Next Qtr) Revisions: 2 Up: 1 Down: 1 F1 (Current Year) Revisions: 6 Up: 1 Down: 5 F2 (Next Year) Revisions: 5 Up: 1 Down: 4 Proj. Sales Growth (F1/F0) % Value Score Magnitude Consensus Estimate Trend (60 days) Cash/Price 0.12 EV/EBITDA PEG Ratio 2.36 Price/Book (P/B) 5.45 Price/Cash Flow (P/CF) P/E (F1) Current Q % Current Q2-2.70% Current F1-3.82% Current F2-5.34% Price/Sales (P/S) 1.89 Earnings Yield 4.88% Upside Zacks Consensus Estimate vs. Most Accurate Estimate Debt/Equity 0.77 Cash Flow ($/share) 4.53 Momentum Score Most Accurate: 0.98 Most Accurate: 1.08 Most Accurate: 3.02 Most Accurate: 3.42 Daily Price Chg -0.39% Zacks Consensus: 1.02 Zacks Consensus: 1.08 Zacks Consensus: 3.02 Zacks Consensus: Week Price Chg 0.03% Q1-3.92% Q2 0.00% F1 0.00% F2 1.48% 4 Week Price Chg 4.75% 12 Week Price Chg % Surprise Reported Earnings History 52 Week Price Chg % 20 Day Average Volume 4,441,043 (F1) EPS Est Wkly Chg 0.00% (F1) EPS Est Mthly Chg -0.28% (F1) EPS Est Qtrly Chg -6.43% (Q1) EPS Est Mthly Chg -0.12% Reported: 0.27 Estimate: 0.26 Q End 12/15 Reported: 0.13 Estimate: 0.10 Q End 09/15 Reported: 1.18 Estimate: 1.19 Q End 06/15 Reported: 1.34 Estimate: 1.32 Q End 03/15 Average 4 Qtr Surprise 2016 Zacks Investment Research, All Rights Reserved 10 S. Riverside Plaza Suite 1600 Chicago, IL 60606

2 The data on the front page and all the charts in the report represent market data as of 03/04/16, while the reports text is as of 03/07/2016 Overview Delaware-based DuPont (DD) is a global science and technology company with a diverse array of product offerings. The company's operating segments are Agriculture, Electronics & Communications, Industrial Biosciences, Nutrition & Health, Performance Materials and Safety & Protection. Agriculture: The business (consists of Pioneer and DuPont Crop Protection) offers corn hybrid, soybean, crop protection products for field crops, among others. Electronics & Communications: The business offers differentiated materials and systems for photovoltaics, consumer electronics, displays and advanced printing. Industrial Biosciences: The segment is comprised of Danisco A/S's enzyme business acquired in 2011, as well as the DuPont Sorona renewably sourced polymer and BioPDO 1,3 propanediol businesses. Nutrition & Health: The segment offers innovative solutions for specialty food ingredients, health and safety. Performance Materials: The business offers productive, higher performance polymers, elastomers, films, parts, and systems and solutions. Safety & Protection: The business satisfies the growing global needs of businesses, governments and consumers for solutions that make life safer, healthier and more secure. DuPont, on Jul 1, 2015, completed the separation of its performance chemicals unit through the spin-off of The Chemours Company. Chemours earlier a part of DuPont is now an independent, publicly traded corporation and started "regular-way" trading on the NYSE on Jul 1. Zacks Equity Research: DD Page 2 of 8

3 Reasons To Buy: DuPont continues to execute strategies for further development and growth of new products, particularly for agriculture, photovoltaics, other alternative energy and materials and to address global megatrend needs for increased food supply, reduced environmental footprint and security. The company s key products including Optimum AQUAmax corn products and Optimum AcreMax insect control products are gaining significant market traction. DuPont has numerous new products in its pipeline that are expected to create value for its customers. DuPont is focused on an aggressive cost-cutting strategy by reducing fixed costs, retrenching employees, restructuring work schedules and improving working capital productivity. The company has achieved its fixed cost and working capital productivity goals. DuPont has also unveiled its redesign actions to support its more focused portfolio of businesses following the spinoff of the performance chemicals unit. These initiatives are expected to deliver cost savings DuPont is expected to gain from new product launches and productivity actions. Moreover, it remains committed to maximize shareholder value. in the near term through reduction of costs associated with the separation of the unit and productivity improvements across the board. The company, in Dec 2015, divulged its plans to cut 10% of its global workforce as part of its 2016 cost savings and restructuring program. The 2016 restructuring program, which builds on the company's operational redesign initiative, is expected to deliver cost reductions of $730 million in The company s operational redesign initiatives delivered savings of around $0.40 per share in DuPont plans to deliver around $0.64 per share in cost reductions in 2016 through its global cost savings and restructuring program. DuPont is committed to maintain a strong balance sheet and to return excess cash to shareholders. DuPont, during third-quarter 2015, entered into an accelerated share repurchase agreement to execute its $2 billion stock repurchase commitment for The company completed the share repurchase program in fourth-quarter The company also expects to return an additional $2 billion to its shareholders through share buybacks in Reasons To Sell: DuPont s agriculture business is faced with industry-wide challenges. Revenues and earnings in this segment are expected to continue to be affected by soft insecticide demand in Latin America and weak farm commodity prices. Tighter profit margins and credit are making growers in Brazil more cautious in their spending. Lower insect pressure in Brazil and abundant inventories in the Americas present headwinds in crop protection markets. The company sees continued challenges in its agriculture business in 2016, as reflected in its guidance for the year. DuPont is exposed to significant currency headwinds stemming from a stronger dollar. The company also faces a challenging operating environment in the agricultural market. The company has a significant number of international transactions involving exchange of foreign currency. It is thus exposed to fluctuations in currency exchange rates, interest rates and commodity prices. Given a strengthening dollar versus most currencies (especially the Brazilian real), DuPont saw currency headwinds of $0.17 per share in the most recent quarter. Unfavorable currency swings are expected to affect the company s earnings by $0.30 per share in Most of the impact is expected in the first half of DuPont derives more than 60% of its sales from the overseas market so a stronger dollar is expected to considerably weigh on its top line in 2016, with most significant impact is expected in the agriculture business. DuPont is also exposed to higher energy and raw material costs, which if not offset fully by the increase in prices, may have a significant impact on its results. Moreover, the company has been focused on several R&D projects. Failure to capture the value of these R&D projects would reduce its earnings growth potential. The company plans to grow earnings by focusing on developing markets and solutions to meet increasing demand for food productivity, decrease dependency on fossil fuels and protect people, assets and the environment. Failure to develop and market new products and manage product life cycles could impact the company's competitive position and have an adverse effect on the company's financial results. Last Earnings Report DuPont's Q4 Earnings Beat, Strong Dollar Hurts Sales DuPont s fourth-quarter 2015 earnings came ahead of expectations, but currency headwinds stemming from a strong U.S. dollar and weak results in its agriculture business dented its top and bottom lines in the quarter. On a reported basis, DuPont posted a loss from continuing operations of $0.26 per share in the quarter versus earnings of $0.63 per share a year ago. Consolidated loss was $253 million or $0.29 per share compared with profit of $683 million or $0.74 per share a year ago. Quarter Ending 12/2015 Report Date Jan 26, 2016 Sales Surprise -2.04% EPS Surprise 3.85% Quarterly EPS 0.27 Annual EPS (TTM) 2.92 The company s agriculture business swung to an operating loss in the quarter. Its bottom line was also hurt by charges related to restructuring actions and a $0.17 per share impact from unfavorable currency translation. Zacks Equity Research: DD Page 3 of 8

4 Barring one-time items including restructuring charges, DuPont logged adjusted earnings of $0.27 per share in the reported quarter versus $0.57 per share registered a year ago. It surpassed the Zacks Consensus Estimate of $0.26. The better-than-expected earnings were aided by cost savings from the company s operational redesign actions that added $0.10 to earnings. For 2015, adjusted earnings were $2.77 per share, down roughly 18% from $3.36 per share in DuPont raked in net sales of $5,299 million for the quarter, a roughly 9% year over year decline. Headwinds from a strong greenback and a double-digit decline in sales in the agriculture business weighed on the company s sales. Declines were witnessed across all segments in the quarter. Sales fell short of the Zacks Consensus Estimate of $5,409 million. For the full year, revenues were $25,130 million, down around 12% year over year. Segment Review Agriculture: Revenues fell 11% year over year to around $1.6 billion in the reported quarter. Segment operating loss was $54 million compared with an income of $134 million a year ago as better productivity, higher pricing and cost savings were more than offset by unfavorable currency impact and shutdown of the LaPorte plant. Electronics & Communications: Sales went down 14% to $493 million in the quarter. Operating earnings for the segment fell 5% year over year to $87 million as productivity improvements and cost savings were more than offset by competitive pressures that affected Solamet paste. Industrial Biosciences: Sales fell 6% to $301 million. Earnings jumped 25% to $55 million gains from cost reduction and productivity actions more than offset currency impact and lower pricing. Nutrition & Health: Sales dipped 4% to $807 million. Operating earnings went up 8% to $85 million as gains from productivity and cost reduction actions and higher volumes more than offset currency impact. Performance Materials: Sales went down roughly 11% to around $1.3 billion. Operating earnings slipped 14% to $281 million as reduced ethylene volumes and prices coupled with unfavorable currency impact more than offset productivity gains and cost savings. Safety & Protection: Sales fell 8% to $864 million. Operating earnings fell 11% to $182 million as unfavorable currency impact and lower demand more than offset productivity improvements and cost reductions. Financials DuPont ended 2015 with cash and cash equivalents of $5.3 billion, down around 23% year over year. Total borrowings and capital lease obligations fell around 17% year over year to roughly $8.8 billion. Outlook DuPont expects operating earnings of $2.95 to $3.10 per share for It includes expected benefit of $0.64 per share from the company s 2016 global cost savings and restructuring plan. DuPont expects sales growth to be challenging in 2016 due to difficult conditions in agriculture & emerging markets and currency headwinds. Unfavorable currency impact on full-year operating earnings is expected to be $0.30 per share, reflecting continued strengthening of the U.S. dollar. Recent News DuPont to Open Thermo-Man Facilities in Brazil And Singapore - Jan 28, 2016 DuPont s Protection Solutions business declared that it will add two new DuPont Thermo-Man testing facilities in Brazil and Singapore in This will lead to an increase in capacity to test and analyze the performance of protective apparel exposed to sudden fire, which is an ever-present risk in many industries that the company serves. The addition of the new facilities will take the total number of DuPont Thermo-Man proprietary testing labs to five worldwide. DuPont Thermo-Man is a life-sized, instrumented mannequin covered with 122 heat sensors. It is one of the most advanced thermal burn injury evaluation devices in the world. It was developed in collaboration with the U.S. government in a bid to provide protection to military personnel against burns. DuPont s Thermo-Man, which is also capable of helping fire fighters, is made in line with stringent international standards. This mannequin simulates what will happen to the wearer in a real-life setting, thereby informing critical design decisions. DuPont, ADM Develop Breakthrough Platform Technology - Jan 19, 2016 DuPont s business division, DuPont Industrial Biosciences, and Archer Daniels Midland Company have unveiled a breakthrough technology which can help generate high-performance renewable materials. The technology has applications in packaging, textiles, engineering plastics and many other industries. Together, DuPont and Archer Daniels have designed a method for producing furan dicarboxylic methyl ester ( FDME ) from fructose. Zacks Equity Research: DD Page 4 of 8

5 FDME has been approved by the U.S. Department of Energy and can be transformed into several high-value, bio-based chemicals or materials that can deliver high performance in a number of applications. Moreover, FDME has been a long sought-after and researched molecule. However, it was not commercially available at an affordable cost. The latest FDME technology surpasses conventional approaches as it is a simple and fast method, leading to higher yields, lower energy usage and reduced capital expenditures. According to Simon Herriott, global business director for biomaterials at DuPont, the molecule will prove to be a game-changing platform technology. It will help produce a variety of 100% renewable, high-performance chemicals and polymers at affordable costs, with applications across a wide range of industries. Additionally, DuPont is encouraged by this partnership with Archer Daniels as the latter is considered to be ideal for jointly developing this new, renewable supply chain for FDME. DuPont's Unit Buys Biotechnology Assets from Dyadic - Dec 31, 2015 DuPont s Industrial Biosciences unit has completed the purchase of enzyme and technology assets from biotech company Dyadic International, Inc. The assets purchased under the deal include Dyadic's C1 platform, a fungal expression technology for producing enzymes used in a vast range of industries. DuPont paid $75 million in cash for the acquisition. Dyadic's R&D lab in the Netherlands has also become part of DuPont Industrial Biosciences. The divestment allows Dyadic to focus exclusively on its biopharmaceutical business. The acquisition further expands biotechnology capabilities of DuPont Industrial Biosciences. The buyout of Dyadic's commercial enzyme assets will allow DuPont to offer enhanced product choices to its customers across animal nutrition, food and beverage and other industrial markets. The state-of-the-art C1 technology also complements DuPont's world-class enzyme expression systems. DuPont, Dow in $130 Billion Historic Merger - Dec 11, 2015 DuPont and Dow Chemical (DOW) have made it official that they plan on combining their businesses to create a chemical powerhouse dubbed DowDuPont with a combined market value of around $130 billion, before eventually breaking up into three independent companies. The two iconic American firms both reeling under the effects of the commodity price slump, weak demand for agricultural chemicals and headwinds from a stronger dollar have agreed to merge in an all-stock deal that has been unanimously cleared by the boards of both companies. The proposed merger will see the union of two of the America s oldest companies with more than three centuries of combined history. Apart from being the largest deal ever in the chemical space, it also ranks among the biggest mergers and acquisitions (M&A) deals announced in Under the deal terms, shareholders of Dow and DuPont will each own about a half of DowDuPont, excluding preferred shares. Dow shareholders will get one share of DowDuPont for each Dow share, while shareholders of DuPont will receive shares in the new company for each DuPont share they hold. DuPont s Chair and CEO Edward Breen will retain his title at the new company. Dow s CEO Andrew N. Liveris will be the Executive Chairman of the combined company. Board of DowDuPont is expected to have 16 directors, consisting of 8 incumbent DuPont directors and 8 current Dow directors. The planned merger, however, would be followed by a breakup of the integrated company into three independent, publicly traded companies through tax-free spin-offs. The combined company would split into pure-play agricultural, material science and specialty products businesses that will be leading players in their respective fields. Advisory Committees will be set up for each of these three businesses. Breen will lead the Agriculture and Specialty Products committees while Liveris will head the Material Science committee. The breakup is expected to take place months after the completion of the deal, which is expected in second-half 2016, subject to regulatory and shareholder clearance. Following the transaction closure, DowDuPont will be dual headquartered in Midland, MI and Wilmington, DE. Both companies expect the proposed merger of equals to enhance their growth profiles through expanded scale and complementary offerings (especially in agriculture), drive shareholder value and create significant cost synergy opportunities. The merger is expected to deliver cost synergies of around $3 billion, expected to be achieved with the first two years after the deal closure. Around $1 billion of additional growth synergies are also expected to be achieved from the merger. Zacks Equity Research: DD Page 5 of 8

6 Industry Analysis Zacks Industry Rank: 234 / 265 (Bottom 12%) Top Peers ASAHI KASEI CP (AHKSY) AIR LIQUIDE-ADR (AIQUY) AKZO NOBEL NV (AKZOY) ALBEMARLE CORP (ALB) AIR PRODS & CHE (APD) AIRGAS INC (ARG) ARKEMA-ADR (ARKAY) AXIALL CORP (AXLL) BASF SE (BASFY) Industry Comparison Chem-diversifd Position in Industry: 2 of 39 Industry Peers DD Market Cap B # of Analysts 12 Dividend Yield 2.46% Growth Score Hist. EPS Growth (3-5 yrs) -2.36% Proj. EPS Growth (F1/F0) 8.95% Curr. Cash Flow Growth % Hist. Cash Flow Growth (3-5 yrs) -2.09% Current Ratio 1.72 Debt/Capital 42.83% Net Margin 6.85% Return on Equity 22.60% Sales/Assets 0.65 Proj. Sales Growth (F1/F0) % Value Score Cash/Price 0.12 EV/EBITDA PEG Ratio 2.36 Price/Book (P/B) 5.45 Price/Cash Flow (P/CF) P/E (F1) Price/Sales (P/S) 1.89 Earnings Yield 4.88% Debt/Equity 0.77 Cash Flow ($/share) 4.53 Momentum Score Daily Price Chg -0.39% 1 Week Price Chg 0.03% 4 Week Price Chg 4.75% 12 Week Price Chg % 52 Week Price Chg % 20 Day Average Volume 4,441,043 (F1) EPS Est Wkly Chg 0.00% (F1) EPS Est Mthly Chg -0.28% (F1) EPS Est Qtrly Chg -6.43% (Q1) EPS Est Mthly Chg -0.12% X Industry S&P B B % 2.14% % 8.38% 2.59% 6.28% -1.20% 3.67% 8.04% 8.11% % 41.03% 5.63% 9.44% 15.65% 17.07% % 2.48% % 5.63% % 0.67% 0.03% 0.02% 4.74% 5.09% -2.77% -1.31% % -7.54% 330,152 3,051, % 0.00% -0.71% -0.13% -5.32% -1.29% -2.77% -0.69% AHKSY AIQUY AKZOY 8.38 B B B % 1.98% 2.18% -2.35% NA -1.46% % 11.06% 0.68% 3.80% -2.01% 13.69% 12.91% 14.99% -1.88% % 33.00% 23.64% 5.25% NA 6.61% 10.24% NA 14.67% 0.89 NA % 1.88% 0.00% NA NA % 5.85% 7.35% % 1.38% 0.55% -0.01% -0.01% -0.02% -2.45% 0.09% -3.36% -8.78% -6.36% % % % % 16, ,258 59, % 0.00% 0.00% % 0.00% 0.68% % -0.40% -3.27% NA NA NA Zacks Equity Research: DD Page 6 of 8

7 Zacks Rank Education The Zacks Rank is calculated from four primary inputs: Agreement, Magnitude, Upside and Surprise. Agreement This is the extent which brokerage analysts are revising their earnings estimates in the same direction. The greater the percentage of estimates being revised higher, the better the score for this component. For example, if there were 10 estimate revisions over the last 60 days, with 8 of those revisions up, and the other 2 down, then the agreement factor would be 80% positive. If, however, 8 were to the downside with only 2 of them up, then the agreement factor would be 80% negative. The higher the percentage of agreement the better. Magnitude This is a measure based on the size of the recent change in the current consensus estimates. The Zacks Rank looks at the magnitude of these changes over the last 60 days. In the chart to the right, the display shows the consensus estimate from 60-days ago, 30-days ago, 7-days ago, and the most current estimate The difference between the current estimate and the estimate from 60-days ago is displayed as a percentage. A larger positive percentage increase will score better on this component. Upside This is the difference between the most accurate estimate, as calculated by Zacks, and the consensus estimate. For example, a stock with a consensus estimate of $1.00, and a most accurate estimate of $1.05 will have an upside factor of 5%. This is not an indication of how much a stock will go up or down. Instead, it's a measure of the difference between these two estimates. This is particularly useful near earnings season as a positive upside percentage can be used to help predict a future surprise. Surprise The Zacks Rank also factors in the last few quarters of earnings surprises. Companies that have positively surprised in the recent past have a tendency of positively surprising again in the future (or missing if they recently missed). A stock with a recent track record of positive surprises will score better on this factor than a stock with a history of negative surprises. These stocks will have a greater likelihood of positively surprising again. Zacks Style Score Education The Zacks Style Score is as a complementary indicator to the Zacks Rank, giving investors a way to focus on the best Zacks Rank stocks that best fit their own stock picking preferences. Academic research has proven that stocks with the best Growth, Value, and Momentum characteristics outperform the market. The Zacks Style Scores rate stocks on each of these individual styles and assigns a rating of A, B, C, D and F. An A, is better than a B; a B is better than a C; and so on. Growth Score Value Score Momentum Score As an investor, you want to buy stocks with the highest probability of success. That means buying stocks with a Zacks Rank #1 or #2, Strong Buy or Buy, which also has a Style Score of an A or a B. Zacks Equity Research: DD Page 7 of 8

8 Disclosures The analysts contributing to this report do not hold any shares of this stock. The EPS and revenue forecasts are the Zacks Consensus estimates. Additionally, the analysts contributing to this report certify that the views expressed herein accurately reflect the analysts' personal views as to the subject securities and issuers. Zacks certifies that no part of the analysts compensation was, is, or will be, directly or indirectly, related to the specific recommendation or views expressed by the analyst in the report. Additional information on the securities mentioned in this report is available upon request. This report is based on data obtained from sources we believe to be reliable, but is not guaranteed as to accuracy and does not purport to be complete. Because of individual objectives, the report should not be construed as advice designed to meet the particular investment needs of any investor. Any opinions expressed herein are subject to change. This report is not to be construed as an offer or the solicitation of an offer to buy or sell the securities herein mentioned. Zacks or its officers, employees or customers may have a position long or short in the securities mentioned and buy or sell the securities from time to time. Zacks uses the following rating system for the securities it covers which results from a proprietary quantitative model using trends in earnings estimate revisions. This model is proven most effective for judging the timeliness of a stock over the next 1 to 3 months. The model assigns each stock a rank from 1 through 5. Zacks Rank 1 = Strong Buy. Zacks Rank 2 = Buy. Zacks Rank 3 = Hold. Zacks Rank 4 = Sell. Zacks Rank 5 = Strong Sell. We also provide a Zacks Industry Rank for each company which provides an idea of the near-term attractiveness of a company s industry group. We have 264 industry groups in total. Thus, the Zacks Industry Rank is a number between 1 and 264. In terms of investment attractiveness, the higher the rank the better. Historically, the top half of the industries has outperformed the general market. Zacks Equity Research: DD Page 8 of 8