DuPont Falls after Weak Outlook

Shares of DuPont (NYSE: DD) were down in pre-market trading at the time of publishing on Tuesday as investors continued to be worried about DuPont’s electronics and industrial business which saw its sales decline by 16% year-over-year in Q1 to $1.3 billion. This business made up 42.9% of DD’s net sales in the first quarter.

Overall, DuPont’s net sales in the first quarter fell by 8% year-over-year to $3 billion, beating consensus estimates of $2.94 billion. Adjusted earnings were up 2% year-over-year to $0.84 per share in the first quarter and surpassed analysts’ estimates of $0.80 per share.

Looking forward, the company’s management issued a light second-quarter outlook with net sales expected to be around $3.02 billion, lower than consensus estimates of $3.10 billion while adjusted earnings are likely to be $0.84 per share, again below analysts’ expectations of $0.87 per share.

In FY23, DuPont projected its sales to range between $12.3 and $12.5 billion versus consensus estimates of $12.69 billion while adjusted earnings are forecasted to be in the range of $3.55 to $3.70 per share and lower than consensus estimates of $3.74 per share.

In addition, the company also announced the acquisition of Spectrum Plastics Group from AEA Investors for $1.75 billion in cash. Spectrum Plastics is an advanced manufacturer of specialty medical devices and components.

The acquisition is expected to close by the end of the third quarter of this year and DuPont expects this acquisition to be immediately accretive to its adjusted EPS and to achieve a return on invested capital (ROIC) in high single-digit by year five. This acquisition is expected to strengthen “DuPont’s position in fast-growing, low cyclicality healthcare markets. Following the acquisition, approximately 10% of DuPont’s consolidated revenue will come from healthcare. “

Analysts are cautiously optimistic about DD stock with a Moderate Buy consensus rating based on eight Buys and three Holds.