DuPont beats revenue estimates. Here’s why the stock is falling.
Materials giant DuPont managed to beat Wall Street’s earnings estimates for the first quarter. Nevertheless, the stock traded lower. There is simply too much weakness in the company’s electronics and industrials business for investors to feel comfortable.
DuPont (ticker: DD) on Tuesday reported first-quarter adjusted profit of 84 cents a share on $3 billion in sales. Wall Street was looking for 80 cents and $2.9 billion, respectively.
In the second quarter, DuPont expects to earn 84 cents per share on $3 billion in sales. Wall Street had forecast a profit of 88 cents on sales of $3.1 billion respectively.
The guidance in the second quarter was a bit light. DuPont also lowered its financial guidance for the full year. The company now expects to earn between $3.55 and $3.70 per share for the year on sales of between $1[ads1]2.3 billion and $12.5 billion. In February, management expected earnings per share of between $3.50 and $4 and sales of $12.3 billion to $12.9 billion.
Shares fell 6.3% in premarket trading on Tuesday to $65 apiece.
S&P 500
and
Dow Jones Industrial Average
Futures were both lower than 0.2%.
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Sales at the company’s electronics and industrial-related businesses fell 16% year-on-year, squeezing profit margins. Sales in DuPont’s water-related business increased by approximately 1%.
“We delivered earnings in line with our expectations for the first quarter of 2023, reflecting the team’s continued strong execution despite a lower volume environment in the electronics and construction-related end markets,” CEO Ed Breen said in a press release. “Our businesses are well positioned to leverage leading market positions and accelerate growth as consumer-driven, short-cycle electronic end markets recover.”
Investors will want to know when the recovery in these markets will take place.
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Along with earnings, DuPont also announced a deal to buy Spectrum Plastics, which sells primarily to medical end markets, for about $1.8 billion. That’s about 15 times estimated 2023 earnings before interest, taxes, depreciation and amortization. The multiple falls to about 13 times when DuPont includes $20 million in expected cost synergies.
DuPont stock trades for about 11 times estimated 2023 Ebitda.
During trading on Tuesday, DuPont shares have risen approx. 1% this year and has risen approx. 5% in the last 12 months.
Write to Al Root at allen.root@dowjones.com