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Keeping a Balanced View on DuPont

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We have maintained our Neutral recommendation on DuPont . While the chemical giant had a healthy first-quarter 2013, we remain on the sidelines considering the lingering weakness across a number of end markets.

Why Maintained?

DuPont beat expectations in the first quarter on strength in its agriculture business, reflected by strong corn seeds and crop protection products sales. The company, on Apr 23, posted adjusted earnings from continuing operations of $1.56 per share for the quarter, topping the Zacks Consensus Estimate by a couple of cents.

Net sales rose 2% year over year to $10,408 million, beating the Zacks Consensus Estimate of $10,378 million. DuPont backed its guidance for 2013.

DuPont, which carries a Zacks Rank #3 (Hold), is witnessing strong momentum in its agriculture business. An early and strong start in the North American growing season boosted the agriculture business in the first quarter.

Moreover, DuPont should continue to benefit from the synergies of Danisco acquisition and its aggressive restructuring actions. DuPont also has numerous new products in its pipeline that are expected to create value for its customers.  

In addition, DuPont has a healthy balance sheet and remains committed to boost shareholder returns. Its Board recently approved a 5% increase in its quarterly dividend to 45 cents per share.

That said, we account for the weakness across titanium dioxide and photovoltaic markets. Demand of titanium dioxide, which is used to give paint and other coatings a white hue, remains weak, partly due to the challenging economic conditions in Europe. Lower titanium dioxide pricing is hurting the results in DuPont’s performance chemical business.

Softness across the industrial and electronic sectors is also affecting DuPont’s Performance Materials segment. The company is also exposed to raw material costs pressure and currency headwinds.

Other Stocks to Consider

Other companies in the chemical industry that are worth considering include Shin-Etsu Chemical Co., Ltd. , Celanese Corporation (CE - Free Report) and FMC Corp. (FMC - Free Report) . While Shin-Etsu Chemical retains a Zacks Rank #1 (Strong Buy), both Celanese and FMC hold a Zacks Rank #2 (Buy).

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