DuPont Earnings Reaffirm Our Stance

+14.86%
Upside
54.75
Market
62.89
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DD: DuPont logo
DD
DuPont

DuPont (NYSE:DD) recently released its Q2 2017 earnings, and a few things stood out to us. First, DuPont’s Agriculture business, which we estimate accounts for about 40% of its value and 50% of its revenue, saw encouraging volume gains which drove nearly 7% revenue growth during the quarter. This is noteworthy, as the business has suffered consistent declines since 2013 primarily due to pricing pressure. However, DuPont has managed to sustain prices this year, and increased soybean acreage in the U.S., as well as higher sales of sunflower and corn seeds in Europe and Latin America, have helped. This improvement is likely to continue in the near term.

Second, the company’s growth in the U.S. rebounded this quarter, thanks to the improved performance of the Agriculture segment. It was also encouraging to see that the Asia Pacific business continued to grow in double digits. This, combined with a rebound in the domestic market, positions DuPont well going forward. Its expected merger with Dow Chemical Company should strengthen its market position, and accordingly we do not expect that price declines will come back into the picture, at least in the near term.

For us, DuPont’s second quarter earnings re-affirmed our expectation that DuPont is capable of navigating extreme competitive and pricing pressure. At this point, we believe that the market has more or less fairly priced its stock.

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Our price estimate of $80 for DuPont is slightly below the market.

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