DuPont de Nemours, Inc. (DD - Free Report) is gaining from its cost and productivity actions, investment in innovation and new product development amid certain headwinds including a weak demand environment.
The company’s shares are down 10.8% over the past three months, compared with the 3.6% rise recorded by the industry.
Let’s find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Favoring the Stock?
DuPont is benefiting from cost synergy savings, productivity improvement and portfolio management actions. It saw productivity benefits in the last reported quarter. The company achieved roughly $145 million in savings from cost synergies and additional cost actions in third-quarter 2019. DuPont aims to deliver more than $500 million in savings in 2019. The company’s cost and productivity initiatives should drive margin expansion.
Moreover, DuPont remains focused on driving growth though innovation and new product development. New product launches are driving growth in automotive electrification, health care, water and sustainable food platforms. The company’s innovation-driven investment is focused on several high-growth areas. It remains committed to drive returns from its R&D investment.
The company also remains focused on driving cash flow and shareholder value. It looks to boost cash flow through working capital productivity and earnings growth. DuPont also remains committed to effective capital allocation. At the end of the third quarter, the company had returned more than $800 million to shareholders since Jun 1, 2019 including $600 million in share buybacks.
A Few Concerns
DuPont faces headwind from weak demand across some of its businesses. Demand weakness in the semiconductor market is affecting volumes in the company’s Electronics & Imaging business unit. Moreover, softness across automotive and electronics end markets are hurting its volumes in Asia and Europe. Weakening global economic conditions and trade tariffs are affecting demand.
Weak demand is expected to affect the company’s full-year organic sales. The company continues to see organic sales for 2019 to be modestly down from last year.
Moreover, higher manufacturing costs will likely weigh on margins. DuPont expects full-year 2019 margins in its nutrition & biosciences and safety & construction units to be hurt by higher manufacturing costs.
DuPont is also exposed to currency headwinds, which is hurting its organic sales. The company expects unfavorable currency impacts on sales and margins across its segments for full-year 2019. DuPont sees greater-than-expected currency headwinds in 2019, which is expected to lower its net sales for the full year. It has also narrowed its adjusted earnings guidance for 2019 factoring in unfavorable currency impact of roughly $45 million in the second half.
Stocks to Consider
Some better-ranked stocks worth considering in the basic materials space include Kirkland Lake Gold Ltd. (KL - Free Report) , Agnico Eagle Mines Limited (AEM - Free Report) and Franco-Nevada Corporation (FNV - Free Report) .
Kirkland Lake Gold has projected earnings growth rate of 97.1% for the current year and sports a Zacks Rank #1 (Strong Buy). The company’s shares have surged around 67% in a year’s time. You can see the complete list of today’s Zacks #1 Rank stocks here.
Agnico Eagle has a projected earnings growth rate of 167.9% for the current year and carries a Zacks Rank #2 (Buy). The company’s shares have rallied roughly 52% in a year’s time.
Franco-Nevada has estimated earnings growth rate of 45.3% for the current year and carries a Zacks Rank #2. The company’s shares have shot up roughly 37% in a year’s time.
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