DowDuPont (DWDP) Q1 Earnings Top Estimates, Decline Y/Y

DowDuPont Inc. (NYSE:DWDP) recorded earnings (on a reported basis) from continuing operations of 23 cents per share for first-quarter 2019, down 51% from 47 cents per share it earned a year ago. Lower prices and volumes weighed on the bottom line in the reported quarter.

Barring one-time items, earnings came in at 84 cents per share for the first quarter, down 25% from $1.12 a year ago. However, it topped the Zacks Consensus Estimate of 70 cents.

DowDuPont logged net sales of $19,649 million, down 9% year over year. It, however, beat the Zacks Consensus Estimate of $8,849 million. The company witnessed lower sales volumes and prices as well as unfavorable currency impact. Currency reduced sales 3% in the quarter.

Volumes fell 2% in the quarter as gains in Asia Pacific and EMEA were more than offset by lower volumes in U.S. & Canada and Latin America. The company also saw a 4% decline in local prices.

Segment Highlights

Specialty Products: Revenues from the division fell 3% to $5.4 billion. Organic sales remained flat year over year. Local prices went up 3% on the back of gains across all regions and most segments. Volumes, however, fell 3% with declines witnessed in all regions and most segments. Currency reduced sales 2% in the quarter. The company witnessed weakness in automotive, smartphones and North America energy markets.

Agriculture: Net sales from the division dropped 11% to $3.4 billion in the reported quarter. Volumes fell 7 percent while prices rose 1%. Currency had an unfavorable impact of 5%. Volume fell 23% in the United States while and prices were essentially flat. Crop Protection sales fell 5% as lower volumes and currency impact more than offset higher prices. Severe weather-related disruptions in North America led to lower overall volumes.

Materials Science: Revenues from the division went down 10% year over year to $10.8 billion in the quarter. Sales were impacted by price decline of 9%.

Financials

DowDuPont had cash and cash equivalents of roughly $11.5 billion at the end of the quarter. Long-term debt was roughly $35 billion.

DowDuPont returned $2.4 billion to its shareholders through dividends and share repurchases in the quarter.

Outlook

Moving ahead, DowDuPont envisions similar market conditions to persist in its Specialty Products unit in the second quarter. It expects recovery of automotive and smartphone demand in the second half of 2019. The company expects net sales for the unit to be roughly flat (organic sales up 2-3%) and operating EBITDA to be modestly down in 2019.

For the Agriculture unit, the company expects operating EBITDA of roughly $2.8 billion for 2019. Sales are forecast to be flat with organic sales are expected to be up low single digits percent. The company expects the segment to recover from the first half decline through price realization and volume opportunities on high demand products as well as new product launches and cost synergy delivery. DowDuPont expects this to result in improved second-half performance on a year-over-year basis.

DowDuPont achieved cost synergies of roughly $400 million in the first quarter.

DowDuPont, last month, completed the separation of its Materials Science unit through the spin-off of Dow Inc., marking the completion of the first step toward the formation of three independent public companies. DowDuPont noted that it remains on track to complete the spin-off of its Agriculture unit, Corteva Agriscience, on Jun 1, 2019.

Price Performance

DowDuPont’s shares are down around 41.2% over a year, underperforming the roughly 21.6% decline recorded by the industry.

Zacks Rank and Stocks to Consider

DowDuPont currently carries a Zacks Rank #5 (Strong Sell).

Better-ranked stocks in the basic materials space include Sandstorm Gold Ltd. (NYSE:SAND) , Flexible Solutions International Inc. (NYSE:FSI) and Israel Chemicals Ltd. (NYSE:ICL) .

Sandstorm Gold has an expected earnings growth rate of 200% for the current year and carries a Zacks Rank #1 (Strong Buy). The company’s shares have gained around 10% over the past year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Flexible Solutions has an expected earnings growth rate of 171.4% for the current year and carries a Zacks Rank #2 (Buy). Its shares have rallied roughly 99% in the past year.

Israel Chemicals has an expected earnings growth rate of 13.5% for the current year and carries a Zacks Rank #2. Its shares have gained around 13% in the past year.

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