DuPont: Earnings Preview

Oct.24.11 | About: E. I. (DD)

EI DuPont de Nemours & Co. (NYSE:DD) is scheduled to report its third-quarter 2011 financial results on Tuesday, October 25, 2011. The current Zacks Consensus Estimate for the quarter is 56 cents a share. For the quarter under review, revenue is $8,884 million, according to the Zacks Consensus Estimate.

Second-Quarter 2011, a Synopsis

DuPont reported an increase in profit of $1.22 billion or $1.37 per share in the second quarter of 2011 from $1.16 billion or $1.17 per share in the same quarter of 2010. The profit exceeded the Zacks Consensus Estimate by 4 cents per share.

The improvement in profit was attributable to higher selling prices, increased sales volume and currency benefit, partly offset by higher raw material, energy, and freight costs.

Sales in the quarter grew 19% to $10.3 billion, up from the Zacks Consensus Estimate of $9.95 billion. The increase in sales reflected a rise of 2% in sales volume, an increase of 11% in local price, 3% currency benefit and 3% net increase from portfolio changes. Sales in the developing markets rose 29%.

Fiscal 2011 Guidance

DuPont upgraded its full-year 2011 earnings outlook to $3.90–$4.05 per share from its previous forecast of $3.65–$3.85 per share. This revision was attributable to the company’s strong earnings results, the expectation for continued global economic growth and about $.05 per share full-year operating earnings from Danisco on an underlying basis.

The company's estimate for the Danisco acquisition on full-year reported earnings is at present a reduction of $.18 to $.29 per share versus the previous estimate of $.30 to $.45 per share. The current view is based on anticipated full-year Danisco operating earnings of about $.05 per share and significant item charges related to the acquisition estimated to be $.23 to $.34 per share.

In addition to these Danisco charges, the company expects a $.03 per share significant item charge in the third quarter associated with a licensing agreement.

Third-Quarter 2011 Consensus

Analysts considered by Zacks, expect DuPont to post third-quarter 2011 earnings of 56 cents a share, reflecting a growth of 39.5% from the year-ago quarter. The current Zacks Consensus Estimates for the quarter ranges from a low of 51 cents to a high of 60 cents.

Zacks Agreement & Magnitude

Of the 10 analysts following the stock, none of the analysts revised their estimates in the last 7 days or in the last 30 days, keeping the current Zacks Consensus Estimate unchanged at 56 cents a share.

Positive Earnings Surprise History

With respect to earnings surprises, the company outdid the Zacks Consensus Estimate in all the trailing four quarters. This is reflected in the average earnings surprise of 21.97%, with positive surprises in each of the quarters involved.

Recommendation

DuPont is a global chemical and life sciences company, employing more than 60,000 people worldwide with a diverse array of product offerings. With over 21,000 patents and 15,000 patent applications worldwide, DuPont sells its products in diverse markets, such as transportation, construction, apparel, agriculture, nutrition and health, packaging and electronics markets.

DuPont faces stiff competition from BASF SE (OTCQX:BASFY) and The Dow Chemical Company (NYSE:DOW).

Currently, DuPont has a short-term (1 to 3 months) Zacks #3 Rank (Hold) and a long- term Neutral recommendation.