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DuPont (DD) Warms Up to Q2 Earnings: What's in the Offing?

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DuPont de Nemours, Inc. (DD - Free Report) is scheduled to come up with its second-quarter 2019 results before the opening bell on Aug 1.

DuPont, which was formerly known as DowDuPont Inc., started trading as a stand-alone company on Jun 3, 2019 following the separation of its Agriculture division through the spin-off of Corteva, Inc.

The company’s shares are down around 4% since it started trading on the NYSE, compared with the roughly 4.6% rise recorded by the industry.


 

Let’s see how things are shaping up for this announcement.

Some Factors at Play

For the second quarter, DuPont expects operating EBITDA in the band of $1,345-$1,375 million. The company also sees adjusted earnings from continuing operation in the range of 80-85 cents per share for the quarter.

DuPont also expects to record non-cash goodwill impairment charges of around $800 million to $1,300 million (pre-tax) in the second quarter. The company noted that the impairment is due to revised financial projections of the Industrial Biosciences unit reflecting unfavorable market conditions.

The company has also reaffirmed its guidance of low-single digits decline for organic net sales and low-single digits decline for adjusted operating EBITDA for the second quarter.

The Zacks Consensus Estimate for revenues for the second quarter for DuPont is currently pegged at $5,641 million.

The company’s Electronics & Imaging segment is expected to face challenges from lower volumes and raw material cost headwinds in the second quarter, affecting the division’s margins. Weak smartphone demand is expected to affect volumes.

At the Nutrition & Biosciences unit, the company expects higher raw material costs and unfavorable currency to more than offset benefits of cost synergy savings, hurting margins in the second quarter.

For the Transportation & Industrial division (earlier known as Transportation & Advanced Polymers), DuPont envisions volume weakness in the June quarter. Lower volumes and currency headwinds are expected to weigh on the segment's margin.

The company also expects continued pricing strength and higher volumes to support sales in the Safety & Construction unit in the to-be-reported quarter. Moreover, cost synergies and higher prices are expected to drive margins in this business.

DuPont has also created a non-core reporting segment (starting with second-quarter reporting) in sync with its commitment to align its portfolio with attractive high-growth market opportunities.

Zacks Model

Our proven model does not show that DuPont is likely to beat estimates this quarter. That is because a stock needs to have 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 DuPont is 0.00%. The Zacks Consensus Estimate for the second quarter is currently pegged at 86 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DuPont currently carries a Zacks Rank #5 (Strong Sell). 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 That Warrant a Look

Here are some other 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:

Arconic Inc. (ARNC - Free Report) has an Earnings ESP of +0.83% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Barrick Gold Corporation (GOLD - Free Report) has an Earnings ESP of +0.70% and carries a Zacks Rank #2.

Carpenter Technology Corporation (CRS - Free Report) has an Earnings ESP of +0.27% and carries a Zacks Rank #3.

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