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DowDuPont (DWDP) Warms Up to Q3 Earnings: What's in Store?
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DowDuPont Inc. is gearing up to release third-quarter 2018 results before the opening bell on Nov 1.
DowDuPont logged adjusted earnings of $1.37 per share in the second quarter, which topped the Zacks Consensus Estimate of $1.33, translating into a positive surprise of around 3%.
The company raked in net sales of $24,245 million for the quarter, which also surpassed the Zacks Consensus Estimate of $23,671 million. The company witnessed higher sales volumes and gains in local prices across all segments and geographic regions. It also gained from new product launches and strong demand across its targeted end-markets.
DowDuPont’s shares have lost around 24.4% over the past three months, underperforming the roughly 18.3% decline recorded by the industry.
Let’s see how things are shaping up for this announcement.
Factors to Watch For
DowDuPont gained from higher pricing and solid demand across most of its end-markets in the second quarter, which will likely continue in the September quarter. It should also benefit from cost synergy realizations and new products.
DowDuPont, during its second-quarter call, said that expects above-market growth through most of its business portfolio on the back of growth investments, geographic reach, innovations and leading market positions.
The company realized cost synergy savings of more than $375 million in the second quarter. It now expects to achieve year-over-year savings of $1.4 billion in 2018, a more than 15% increase from the previous target. The company expects to realize $400-$425 million of synergy savings in the third quarter.
DowDuPont also said that it expects net sales in the third quarter to increase more than 10% and operating EBITDA to rise more than 12% on a year-over-year basis. It sees net sales to be in the range of $20 billion to $20.5 billion for the third quarter. The company envisions healthy demand and higher pricing across most of its businesses in the quarter. The Zacks Consensus Estimate for revenues for the third quarter stands at $20,305 million, reflecting an estimated 16.3% decline on a sequential comparison basis.
DowDuPont expects its Materials Science segment to gain, in the third quarter, from contributions from end-market growth, cost synergies, higher pricing, an improvement in equity earnings from the Sadara joint venture and new supplies from the U.S. Gulf Coast.
The company also expects its Specialty Products division to benefit from strong demand in key end-markets, volume and pricing gains, new product launches and contributions from cost synergies.
However, DowDuPont expects its Agriculture unit to face headwinds from a reduction in planted corn area in Brazil and weakness in the Brazilian Real. Nevertheless, the division is expected to gain from cost synergies and new product launches.
DowDuPont’s shares took a hit earlier this month after the company, in a regulatory filing, disclosed a hefty $4.6 billion impairment charge associated with goodwill and certain other assets of its Agriculture unit. The company also said that it expects reduced cash flow for the Agriculture unit due to lower sales and margin growth in North America and Latin America as well as unfavorable currency impacts related to the Brazilian real.
DowDuPont stated that the lower growth expectation is due to reduced planted area, delays in product registrations and an unfavorable shift to soybeans from corn in Latin America. Moreover, lower commodity prices and higher-than-expected industry grain inventories are likely to affect farmers’ income and buying choices, leading to pricing pressure and a shift to lower technologies, the company noted.
The company, in a note, later said that the goodwill impairment is non-cash and reflects the effect of earlier reported market conditions. It has no impact on its earlier communicated financial guidance for the Agriculture unit for full-year 2018, the company added.
DowDuPont earlier said it expects flat net sales and a mid-single digits percent increase in operating EBITDA for the Agriculture division for 2018. The division is on track for separation from DowDuPont as Corteva Agriscience on Jun 1, 2019.
Earnings Whispers
Our proven model does not conclusively show that DowDuPont is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:
Earnings ESP: Earnings ESP for DowDuPont is currently pegged at 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 71 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: DowDuPont currently carries a Zacks Rank #3, which when combined with a 0.00% ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Nutrien Ltd. (NTR - Free Report) has an Earnings ESP of +10.43% and carries a Zacks Rank #2.
Domtar Corporation has an Earnings ESP of +7.90% and carries a Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
Image: Bigstock
DowDuPont (DWDP) Warms Up to Q3 Earnings: What's in Store?
DowDuPont Inc. is gearing up to release third-quarter 2018 results before the opening bell on Nov 1.
DowDuPont logged adjusted earnings of $1.37 per share in the second quarter, which topped the Zacks Consensus Estimate of $1.33, translating into a positive surprise of around 3%.
The company raked in net sales of $24,245 million for the quarter, which also surpassed the Zacks Consensus Estimate of $23,671 million. The company witnessed higher sales volumes and gains in local prices across all segments and geographic regions. It also gained from new product launches and strong demand across its targeted end-markets.
DowDuPont’s shares have lost around 24.4% over the past three months, underperforming the roughly 18.3% decline recorded by the industry.
Let’s see how things are shaping up for this announcement.
Factors to Watch For
DowDuPont gained from higher pricing and solid demand across most of its end-markets in the second quarter, which will likely continue in the September quarter. It should also benefit from cost synergy realizations and new products.
DowDuPont, during its second-quarter call, said that expects above-market growth through most of its business portfolio on the back of growth investments, geographic reach, innovations and leading market positions.
The company realized cost synergy savings of more than $375 million in the second quarter. It now expects to achieve year-over-year savings of $1.4 billion in 2018, a more than 15% increase from the previous target. The company expects to realize $400-$425 million of synergy savings in the third quarter.
DowDuPont also said that it expects net sales in the third quarter to increase more than 10% and operating EBITDA to rise more than 12% on a year-over-year basis. It sees net sales to be in the range of $20 billion to $20.5 billion for the third quarter. The company envisions healthy demand and higher pricing across most of its businesses in the quarter. The Zacks Consensus Estimate for revenues for the third quarter stands at $20,305 million, reflecting an estimated 16.3% decline on a sequential comparison basis.
DowDuPont expects its Materials Science segment to gain, in the third quarter, from contributions from end-market growth, cost synergies, higher pricing, an improvement in equity earnings from the Sadara joint venture and new supplies from the U.S. Gulf Coast.
The company also expects its Specialty Products division to benefit from strong demand in key end-markets, volume and pricing gains, new product launches and contributions from cost synergies.
However, DowDuPont expects its Agriculture unit to face headwinds from a reduction in planted corn area in Brazil and weakness in the Brazilian Real. Nevertheless, the division is expected to gain from cost synergies and new product launches.
DowDuPont’s shares took a hit earlier this month after the company, in a regulatory filing, disclosed a hefty $4.6 billion impairment charge associated with goodwill and certain other assets of its Agriculture unit. The company also said that it expects reduced cash flow for the Agriculture unit due to lower sales and margin growth in North America and Latin America as well as unfavorable currency impacts related to the Brazilian real.
DowDuPont stated that the lower growth expectation is due to reduced planted area, delays in product registrations and an unfavorable shift to soybeans from corn in Latin America. Moreover, lower commodity prices and higher-than-expected industry grain inventories are likely to affect farmers’ income and buying choices, leading to pricing pressure and a shift to lower technologies, the company noted.
The company, in a note, later said that the goodwill impairment is non-cash and reflects the effect of earlier reported market conditions. It has no impact on its earlier communicated financial guidance for the Agriculture unit for full-year 2018, the company added.
DowDuPont earlier said it expects flat net sales and a mid-single digits percent increase in operating EBITDA for the Agriculture division for 2018. The division is on track for separation from DowDuPont as Corteva Agriscience on Jun 1, 2019.
Earnings Whispers
Our proven model does not conclusively show that DowDuPont is likely to beat the Zacks Consensus Estimate this quarter. That is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. That is not the case here, as you will see below:
Earnings ESP: Earnings ESP for DowDuPont is currently pegged at 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 71 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: DowDuPont currently carries a Zacks Rank #3, which when combined with a 0.00% ESP, makes surprise prediction difficult.
Note that we caution against Sell-rated stocks (#4 or 5) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks to Consider
Here are some companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
CF Industries Holdings, Inc. (CF - Free Report) has an Earnings ESP of +36.36% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.
Nutrien Ltd. (NTR - Free Report) has an Earnings ESP of +10.43% and carries a Zacks Rank #2.
Domtar Corporation has an Earnings ESP of +7.90% and carries a Zacks Rank #2.
The Hottest Tech Mega-Trend of All
Last year, it generated $8 billion in global revenues. By 2020, it's predicted to blast through the roof to $47 billion. Famed investor Mark Cuban says it will produce "the world's first trillionaires," but that should still leave plenty of money for regular investors who make the right trades early.
See Zacks' 3 Best Stocks to Play This Trend >>