4 Key Trends Impacting DuPont
Here we look at some key trends affecting DuPont’s (NYSE:DD) equity value. DuPont is a diversified chemical company, which supplies agricultural products (such as seeds and pesticides), high-performance materials, automotive coatings, electronic materials and other key industrial chemicals to industrial and mass consumers world-wide. DuPont competes with other major chemical & agricultural companies such as Dow Chemicals (NYSE: DOW), 3M (NYSE:MMM), Monsanto (NYSE:MON), Syngenta and BASF.
Our price estimate for DuPont stands at $58.10, roughly implying a 5% premium to the market price.
1) Global Recovery in Demand to Boost Chemical Industry
The demand for chemicals and materials is strongly dependent on healthy macro-economic conditions such as GDP and industrial growth. We expect higher revenue growth in chemical companies globally as economic growth continues driving industrial demand from recessionary levels.
2) Supply/ Demand Shifting to Emerging Countries
Developing markets, especially China, present immense growth opportunities for specialty chemicals, electronic chemicals and coatings due to high economic growth and various governments commitments on infrastructure development. With increased capacity additions underway outside the U.S., we expect both demand and supply of DuPont’s key operating divisions to shift to emerging economies.
3) Environmental Regulations can Restrict Market Share
In recent years, the global coatings industry has seen increased monitoring from agencies/governments, primarily due to VOC (Volatile Organic Compounds) emissions which present a threat to the ozone layer. Concerns also exist over other class of chemicals, such as PFOA – a chemical processing agent used in high-performance chemicals. We expect that increased scrutiny by environmental agencies has the potential to adversely impact both demand and pricing for DuPont’s products.
4) Price Uncertainty in Hydrocarbon-based Raw Materials
Many of DuPont’s divisions rely on raw materials which are primarily hydrocarbon-based. This is especially applicable to the Performance and Safety materials division, which constitutes almost 40% of the Trefis price estimate.
Examples of hydrocarbon-based feedstock includes benzene, polyethylene and butadiene. Hydrocarbon prices are highly volatile due to their dependence on various macroeconomic and political factors, and any spike(s) in prices can significantly impact gross margins.
Relevant Articles
- Should You Buy DuPont Stock At $84?
- Can DuPont Stock Rebound After A 13% Drop In 10 Days?
- 35% Downside For DuPont Stock?
- After A 25% Fall Is PPG Industries A Better Buy Than DuPont?
- DuPont Down 40% Over The Last One Month, Will It Continue To Underperform?
- What’s DuPont’s Fair Stock Price Estimate Based On Expected 2019 Earnings?