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Why Is DuPont (DD) Down 4.7% Since the Last Earnings Report?

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A month has gone by since the last earnings report for E.I. du Pont de Nemours and Company . Shares have lost about 4.7% in that time frame, underperforming the market.

Will the recent negative trend continue leading up to the stock's next earnings release, or is it due for a breakout? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important drivers.

DuPont's Q2 Earnings & Revenues Beat Estimates

DuPont 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 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 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.

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.

Financials
 
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.

Outlook

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

How Have Estimates Been Moving Since Then?

Analysts were quiet during the last one month period as none of them issued any earnings estimate revisions.

E.I. du Pont de Nemours and Company Price and Consensus

 

VGM Scores

At this time, the stock has a poor Growth Score of F, however its Momentum is doing a bit better with a D. The stock was also allocated a grade of D on the value side, putting it in the bottom 40% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Our style scores indicate investors will probably be better served looking elsewhere.

Outlook

The stock has a Zacks Rank #2 (Buy). We are expecting an above average return from the stock in the next few months.




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