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Here's Why You Should Hold Onto DuPont (DD) Stock for Now
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DuPont de Nemours, Inc. (DD - Free Report) is expected to gain from its innovation-driven investment, productivity actions and the Spectrum Plastics Group acquisition amid certain challenges including weaker demand in specific businesses.
The company’s shares are up 17.5% over a year against a 4.7% decline of its industry.
Image Source: Zacks Investment Research
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Productivity, Innovation & Spectrum Buyout to Aid DuPont
DuPont remains focused on driving growth though innovation and new product development. Its innovation-driven investment is focused on several high-growth areas. DD remains committed to drive returns from its R&D investment.
The company, in August 2023, completed the buyout of leading manufacturer of specialty medical devices and components, Spectrum Plastics Group from AEA Investors for $1.75 billion. The acquisition strengthens DuPont’s existing position in stable and fast-growing healthcare end markets. It is also in sync with its focus on high-growth, customer-driven innovation for the healthcare market.
Moreover, DuPont is benefiting from cost synergy savings and productivity improvement actions. Benefits of its structural cost actions are expected to be realized in 2024. DD also continues to implement strategic price increases in the wake of cost inflation. These actions are likely to support its results. DuPont is also executing additional restructuring actions and expects annualized cost savings of $150 million from these measures with around $100 million anticipated in 2024.
DuPont, last month, announced a strategic plan to separate into three distinct, publicly traded companies aimed at unlocking value for shareholders and enhancing operational focus. The proposed separations of the Electronics and Water businesses will be executed in a tax-free manner for DuPont shareholders, resulting in New DuPont, Electronics and Water as independent entities. Each company will benefit from increased agility and focus within their respective industries while maintaining strong balance sheets and attractive financial profiles.
The separations are expected to be completed within 18-24 months, subject to customary conditions and regulatory approvals. These transactions will be tax-free for DD shareholders and will not require a shareholder vote. All three resulting companies are anticipated to have strong balance sheets and sufficient capitalization to pursue future growth opportunities.
Softness in Water & Industrial Businesses a Concern
DuPont’s water business is exposed to headwinds from the slowdown in China. Its water solutions business is seeing sales moderation due to softer demand in China resulting from the slowdown in the industrial economy and distributor inventory de-stocking. The company expects de-stocking within industrial-based end markets in the second quarter of 2024. Weaker water demand in China is also likely to continue in the quarter. DD sees sales in the Water & Protection unit to decline by high-single digits in second-quarter 2024 factoring in the de-stocking impact in water solutions.
The Industrial Solutions business is also being challenged by de-stocking within biopharma applications. Organic sales in this business declined roughly 20% year-over-year in the first quarter due to lower volumes resulting from continued channel inventory destocking. DuPont sees additional de-stocking within its industrial-based businesses in the second quarter.
Better-ranked stocks in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) , Axalta Coating Systems Ltd. (AXTA - Free Report) and ATI Inc. (ATI - Free Report) .
Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 15.1%. The company’s shares have soared roughly 93% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Axalta Coating Systems, carrying a Zacks Rank #1, has a projected earnings growth rate of 26.8% for the current year. In the past 60 days, the consensus estimate for AXTA's current-year earnings has been revised upward by 5.9%. The company’s shares have gained roughly 8% in the past year.
ATI currently carries a Zacks Rank #2 (Buy). ATI beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 8.3%. The company’s shares have rallied around 37% in the past year.
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Here's Why You Should Hold Onto DuPont (DD) Stock for Now
DuPont de Nemours, Inc. (DD - Free Report) is expected to gain from its innovation-driven investment, productivity actions and the Spectrum Plastics Group acquisition amid certain challenges including weaker demand in specific businesses.
The company’s shares are up 17.5% over a year against a 4.7% decline of its industry.
Image Source: Zacks Investment Research
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
Productivity, Innovation & Spectrum Buyout to Aid DuPont
DuPont remains focused on driving growth though innovation and new product development. Its innovation-driven investment is focused on several high-growth areas. DD remains committed to drive returns from its R&D investment.
The company, in August 2023, completed the buyout of leading manufacturer of specialty medical devices and components, Spectrum Plastics Group from AEA Investors for $1.75 billion. The acquisition strengthens DuPont’s existing position in stable and fast-growing healthcare end markets. It is also in sync with its focus on high-growth, customer-driven innovation for the healthcare market.
Moreover, DuPont is benefiting from cost synergy savings and productivity improvement actions. Benefits of its structural cost actions are expected to be realized in 2024. DD also continues to implement strategic price increases in the wake of cost inflation. These actions are likely to support its results. DuPont is also executing additional restructuring actions and expects annualized cost savings of $150 million from these measures with around $100 million anticipated in 2024.
DuPont, last month, announced a strategic plan to separate into three distinct, publicly traded companies aimed at unlocking value for shareholders and enhancing operational focus. The proposed separations of the Electronics and Water businesses will be executed in a tax-free manner for DuPont shareholders, resulting in New DuPont, Electronics and Water as independent entities. Each company will benefit from increased agility and focus within their respective industries while maintaining strong balance sheets and attractive financial profiles.
The separations are expected to be completed within 18-24 months, subject to customary conditions and regulatory approvals. These transactions will be tax-free for DD shareholders and will not require a shareholder vote. All three resulting companies are anticipated to have strong balance sheets and sufficient capitalization to pursue future growth opportunities.
Softness in Water & Industrial Businesses a Concern
DuPont’s water business is exposed to headwinds from the slowdown in China. Its water solutions business is seeing sales moderation due to softer demand in China resulting from the slowdown in the industrial economy and distributor inventory de-stocking. The company expects de-stocking within industrial-based end markets in the second quarter of 2024. Weaker water demand in China is also likely to continue in the quarter. DD sees sales in the Water & Protection unit to decline by high-single digits in second-quarter 2024 factoring in the de-stocking impact in water solutions.
The Industrial Solutions business is also being challenged by de-stocking within biopharma applications. Organic sales in this business declined roughly 20% year-over-year in the first quarter due to lower volumes resulting from continued channel inventory destocking. DuPont sees additional de-stocking within its industrial-based businesses in the second quarter.
DuPont de Nemours, Inc. Price and Consensus
DuPont de Nemours, Inc. price-consensus-chart | DuPont de Nemours, Inc. Quote
Socks to Consider
Better-ranked stocks in the basic materials space include Carpenter Technology Corporation (CRS - Free Report) , Axalta Coating Systems Ltd. (AXTA - Free Report) and ATI Inc. (ATI - Free Report) .
Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 15.1%. The company’s shares have soared roughly 93% in the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.
Axalta Coating Systems, carrying a Zacks Rank #1, has a projected earnings growth rate of 26.8% for the current year. In the past 60 days, the consensus estimate for AXTA's current-year earnings has been revised upward by 5.9%. The company’s shares have gained roughly 8% in the past year.
ATI currently carries a Zacks Rank #2 (Buy). ATI beat the Zacks Consensus Estimate in each of the last four quarters, with the average earnings surprise being 8.3%. The company’s shares have rallied around 37% in the past year.