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Analyst Blog

Chemical and industrial products behemoth E. I. du Pont de Nemours and Company is scheduled to report its second-quarter 2012 results before the market opens on Tuesday, July 24. The Zacks Consensus Estimate for earnings for the quarter is $1.46 per share, representing an estimated year-over-year increase of 6.83%.

With respect to earnings surprises, the company has surpassed the Zacks Consensus Estimate in the trailing four quarters. This is reflected in the average positive earnings surprise of 9.04%.

First Quarter Recap

DuPont reported earnings of $1.61 per share in the first quarter of 2012. The results exceeded the Zacks Consensus Estimate of $1.55.

Sales in the first quarter grew 12% year over year to $11.23 billion, driven by strong performance in Agriculture and Performance Chemicals, price hikes, and the benefit of prior-year acquisitions in Nutrition & Health and Industrial Biosciences. Sales volumes for Agriculture segment increased across all regions. However, sales volumes for other segments remained flat in Asia.

Company’s Guidance

DuPont reiterated its full-year 2012 earnings outlook of $4.20 to $4.40 per share, an increase of 7% to 12% compared with 2011, excluding significant items.

Estimate Revisions Trend

Agreement

Estimates for DuPont show limited movements over the past week. Over the last 7 days, there has been no upward revision in the second quarter estimate by any of the 14 analysts. However, 2 analysts have decreased their forecasts over the same period. A similar trend applies for 2012, with none of the 16 analysts increasing estimates while 2 analysts revising their estimates in the opposite direction.

Estimates for 2012 demonstrate a negative bias over the last 30 days with 8 analysts having lowered their forecasts with none taking the opposite route. For the second quarter, estimates are negatively inclined over the past month with 3 analysts lowering their forecasts coupled with one upward revision.

Magnitude

Estimates for both the second quarter and 2012 have declined by a penny over the last week. Over the last month, estimates for the second quarter and 2012 have decreased by 1 cent and 4 cents, respectively. The current Zacks Consensus Estimates for 2012 is $4.27.   

Our View

Despite softness in the consumer electronics segment, DuPont delivered strong results in the first quarter. The company also faced some economic headwinds in the quarter. Sales from its nutrition and health business jumped two fold in the first quarter, primarily driven by the acquisition of Danisco's enzyme business.

Also, markets for the company’s agriculture and food businesses continue to be strong, especially, with a strong planting season in Latin America. However, DuPont faces stiff competition from The Dow Chemical Company and BASF SE , in addition to weakness in the housing and construction markets. Moreover, sluggish economic conditions might prove to be headwinds for the company going forward.

Currently, we have a long-term (more than 6 months) Neutral recommendation on DuPont. The stock currently holds a Zacks #4 Rank, reflecting a short-term (1 to 3 months) Sell rating.

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