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DuPont's (DD) Q2 Earnings & Revenues Trounce Estimates

DuPont DD kept its positive earnings surprise streak alive with a solid beat in second-quarter 2017, supported by strong volume gains and healthy performance of its agriculture unit.

The Delaware-based company recorded adjusted earnings of $1.38 per share in the reported quarter, up 11% from $1.24 per share a year ago. The results topped the Zacks Consensus Estimate of $1.29.

On a reported basis, DuPont posted earnings from continuing operations of 97 cents per share for the quarter, down 16% from $1.16 per share a year ago. Charges associated with the planned merger with Dow Chemical DOW weighed on the bottom line.

Operating margin increased around 80 basis points in the quarter, mainly on improvements across Electronics & Communications, Industrial Biosciences and Agriculture units.

DuPont logged net sales of $7,424 million, up roughly 5% year over year on higher volumes. That also surpassed the Zacks Consensus Estimate of $$7,260 million. Volumes rose 6% while local prices edged down 1%. DuPont saw higher volumes across all segments in the reported quarter, mainly led by Agriculture, Electronics & Communications and Protection Solutions.

E.I. du Pont de Nemours and Company Price, Consensus and EPS Surprise


E.I. du Pont de Nemours and Company Price, Consensus and EPS Surprise | E.I. du Pont de Nemours and Company Quote

Segment Review
Agriculture: Revenues rose 7% year over year to around $3.4 billion in the reported quarter. Sales benefited from changes in timing of seed deliveries. Segment operating earnings increased 11% to around $963 million, aided by higher volumes that offset lower local pricing and increased product costs.  Volume gains was supported by higher insecticide and fungicide sales.

Electronics & Communications: Sales went up 11% year over year to $546 million in the quarter. Operating earnings for the segment surged 25% year over year to $116 million, driven by volume gains on higher demand in consumer electronics and semiconductor markets as well as strong photovoltaic sales.

Industrial Biosciences: Sales rose 11% year over year to $395 million. Earnings rose 23% to $76 million on volume growth and better mix that more than offset higher costs.

Nutrition & Health: Sales fell 2% year over year to $818 million. Operating earnings went up 4% to $135 million on volume gains.

Performance Materials: Sales went up 3% year over year to around $1.4 billion. Operating earnings rose 1% to $329 million, aided by higher volumes and improved local prices.

Protection Solutions: Sales rose 2% year over year to $801 million. Operating earnings went up 2% to $191 million as higher volumes more than offset lower local price and increased costs.

DuPont ended the quarter with cash and cash equivalents of roughly $3.3 billion, down around 25% year over year. Total borrowings and capital lease obligations rose around 30% year over year to roughly $13.5 billion.


Moving ahead, DuPont said that it continues to expect the closing of its merger with Dow Chemical to take place in Aug 2017.

DuPont and Dow, last month, secured clearance from Canada's Competition Bureau for the merger after they agreed to sell certain assets and businesses. The companies also received the U.S. antitrust approval for the merger in June. Moreover, the European Commission conditionally approved the merger in Mar 2017.

The companies, last month, also noted that their boards have jointly commenced a comprehensive portfolio review aimed at capturing material value-enhancing opportunities. The board of the combined company is expected to assess the results of this review after the completion of the merger transaction. The merger is projected to deliver cost synergies of around $3 billion and growth synergies of roughly $1 billion.

Price Performance

DuPont's shares have rallied 22% over the past year, outperforming the 20.4% gain of the industry it belongs to.


Zacks Rank & Key Picks

DuPont currently carries a Zacks Rank #3 (Hold).

Better-placed companies in the basic materials space include The Chemours Company CC and Ternium S.A. TX, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected long-term earnings growth of 15.5%.

Ternium has an expected long-term earnings growth of 18.4%.

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