DuPont (NYSE:DD) is scheduled to announce its Q1 earnings on April 19, 2012. We expect the company’s two broader divisions, performance & safety materials and agriculture & nutrient-based products, to drive the company’s revenues. A general increase in DuPont’s products should help the company maintain profitability. DuPont competes with other chemical manufacturing majors such as Dow Chemical Company (NYSE: DOW) and Bayer AG (BAY:GR).
We have a $59 price estimate for DuPont’s stock, which is around 11% above the current market price.
We expect top-line growth in performance materials due to an increase in global motor vehicles built by the OEMs. We also expect the packaging market will continue to remain stable, which will further add resilience to the division. Sales in the broader performance & safety materials division in 2011 were $18.4 billion, contributing a little less than 50% to the total revenues. The corresponding figure for 2010 was $15.7 billion.
Margins should stabilize since the company has been passing on the higher cost of raw materials by raising its product prices periodically. For example, DuPont announced an increase of Euro 0.15/kg for its Elvax EVA copolymers in Europe, Middle East and Africa this year. [1] Similarly, the prices of titanium oxide and Cyrel products have been raised although the price hike will be effective April 1, 2012, which will not impact Q1 results. [2]
Global Investments to Drive Growth for Agriculture and Nutrient-based Products
Agriculture and nutrient-based products is one division which has consistently been able to grow not only by sales but also by volumes. It also nicely fits in with the macro trend which dictates that the world will have to feed an additional 10 billion people in the next 40 years. To respond to this growing demand, DuPont will spend as much as $10 billion on research and development of solutions dedicated to agriculture and nutrient market by 2020.
DuPont recently opened a new $40 million agriculture research center in Johnston, Iowa, to focus on plant breeding and developing new transgenic products. Earlier this year, the company opened two innovation centers in Brazil and Mexico in March after having opened four centers in Korea, Taiwan, Thailand and India last year. The innovation centers will focus on sectors such as food, consumer goods, automotive, agriculture and alternative energy.
Understand How a Company’s Products Impact its Stock Price at Trefis
Notes:- DuPont announces price increase in Europe for Elvax® EVA Copolymer (15-2-2012), plastemart.com, 15 February, 2012 [↩]
- DuPont Titanium Technologies Announces a Price Increase for Ti-Pure® Titanium Dioxide Products Sold in North America, prnewswire.com, March 5, 2012 [↩]
