DowDuPont (DWDP) Q4 Earnings: Is A Beat In The Cards?

DowDuPont Inc. (NYSE:DWDP) is set to release fourth-quarter 2017 results before the opening bell on Feb 1.

DowDuPont was formed through the $130-billion mega-merger of chemical giants, The Dow Chemical Company (NYSE:DOW) and E.I. du Pont de Nemours & Company (DuPont), which completed on Aug 31, 2017.

DowDuPont logged a profit (on a reported basis) of roughly $514 million or 32 cents per share in third-quarter 2017, down around 29% from a profit of $719 million or 63 cents per share recorded in the comparable period a year ago. Adjusted earnings were 55 cents per share for the quarter.

The company raked in net sales (on a reported basis) of $15,354 million in the third quarter, up roughly 23% year over year. Adjusted net sales for the quarter was $18,285 million, up 8% year over year.

DowDuPont has underperformed the industry it belongs to since it started trading on the NYSE on Sep 1, 2017. The company’s shares have gained around 13% over this period, compared with roughly 17.6% gain recorded by the industry.

Let’s see how things are shaping up for this announcement.

Earnings Whispers

Our proven model shows that DowDuPont is likely to beat on earnings estimates this quarter. This is because it has the right combination of two key ingredients, a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold).

Zacks ESP: Earnings ESP for DowDuPont is currently pegged at +1.37%. This is because the Most Accurate estimate stands at 68 cents while the Zacks Consensus Estimate is pegged at 67 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DowDuPont currently carries a Zacks Rank #2. The combination of a favorable Zacks Rank and a positive ESP makes us reasonably confident of an earnings beat.

Conversely, Sell-rated stocks (Zacks Rank #4 or 5) should never be considered going into an earnings announcement, especially when the company is seeing negative estimate revisions.

Factors to Watch For

DowDuPont, in the third quarter, gained from higher volumes and pricing, solid demand in most of its core end-markets as well as increased equity earnings that more than offset higher feedstock costs, weak agriculture market conditions and unfavorable impacts of hurricanes.

The company, in its third-quarter call, said that it sees adjusted net sales to be in the range of $19 billion to $19.5 billion for the fourth quarter, a more than 7% growth from the comparable quarter a year ago. The Zacks Consensus Estimate for revenues for DowDuPont for the fourth quarter stands at $19,371 million.

The company also sees adjusted operating EBITDA to rise 11% to 13% year-over-year in the fourth quarter with growth in all segments. The company is expected to continue to gain from higher volumes (driven by strong demand) and pricing coupled with new product penetrations and improved mix in the December quarter, offsetting headwinds from raw material cost inflation. Strong growth in semiconductors and consumer electronics is expected to continue in the fourth quarter.

The company also expects its agriculture business to return to growth in the fourth quarter with sales growing around 10% on a year over year basis, supported by increased fungicide sales, higher corn volumes in Latin America and portfolio benefits. The division’s sales, in the third quarter, was hit by lower volumes and pricing, challenges from lower planted corn area in Brazil and a delayed start to the country’s summer season.

DowDuPont also said that demand outlook remains positive for most of its key end-markets. It will remain focused on executing its near-term priorities that include delivering earnings and cash flow growth, executing its $3-billion cost synergy initiatives and advancing activities to create three growth companies in Agriculture, Materials Science and Specialty Products businesses.

DowDuPont also declared it will take actions to enable cost savings of $3 billion. These include workforce reductions, buildings and facilities consolidations and select asset shutdowns. DowDuPont recorded pre-tax charges of $180 million in the third quarter in connection with the actions. It expects to record total pre-tax charges of around $2 billion, with around $1 billion expected in the fourth quarter.

Other Stocks to Consider

Here are some companies in the basic materials space you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:

Huntsman Corporation (NYSE:HUN) has an Earnings ESP of +3.27% and carries a Zacks Rank #1.

Agnico Eagle Mines Limited (NYSE:AEM) has an Earnings ESP of +20.99% and carries a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.

LyondellBasell Industries NV (NYSE:LYB) has an Earnings ESP of +0.55% and a Zacks Rank #2.

Don’t Even Think About Buying Bitcoin Until You Read This

The most popular cryptocurrency skyrocketed last year, giving some investors the chance to bank 20X returns or even more. Those gains, however, came with serious volatility and risk. Bitcoin sank 25% or more 3 times in 2017.

Zacks’ has just released a new Special Report to help readers capitalize on the explosive profit potential of Bitcoin and the other cryptocurrencies with significantly less volatility than buying them directly.

See 4 crypto-related stocks now >>