DowDuPont (DWDP) Tops Earnings, Revenue Estimates In Q4

DowDuPont Inc. (NYSE:DWDP) recorded a loss (on a reported basis) from continuing operations of 52 cents per share for fourth-quarter 2017, compared with a loss from continuing operations of 3 cents per share logged in the comparable quarter a year ago.

Barring one-time items, earnings came in at 83 cents per share for the quarter, which outstripped the Zacks Consensus Estimate of 67 cents.

DowDuPont, which was formed through the merger of The Dow Chemical Company (NYSE:DOW) and E.I. du Pont de Nemours & Company (DuPont) that completed on Aug 31, 2017, raked in net sales (on a reported basis) of $20,066 million for the reported quarter. It also surpassed the Zacks Consensus Estimate of $19,371 million. Sales rose 13% from adjusted net sales of $17,734 million for the comparable quarter a year ago.

Volumes (as adjusted) rose 6% in the quarter on gains across all segments and geographies, driven by strong demand for the company’s products. The company also saw a 5% rise in adjusted local prices on gains in all geographic areas.

FY17 Results

For 2017, earnings (as reported) from continuing operations were 95 cents per share compared with earnings from continuing operations of $3.52 per share in 2016.

Net sales (as reported) jumped roughly 30% year over year to $62,484 million in 2017. Adjusted net sales rose 12% year over year to $79,535 million on gains across all segments and geographies.

Segment Highlights

Agriculture: Net sales rose roughly 5% from the year-ago adjusted sales to $2.8 billion in the reported quarter on higher volumes, favorable currency impact and benefits of portfolio actions. The company saw organic revenue growth in both seed and crop protection.

Performance Materials & Coatings: Net sales from the division were $2.2 billion, up 15%, supported by double-digit gains across all geographic regions. The unit saw increases in local prices and volume in the quarter.

Industrial Intermediates & Infrastructure: Net sales from the division jumped 27% to $3.6 billion in the quarter driven by gains in all geographies, volume gains and higher pricing.

Packaging & Specialty Plastics: Net sales went up 17% to $6.1 billion. Sales were driven by higher volumes, increased local prices and favorable currency impact.

Electronics & Imaging: Net sales edged up 1% to $1.2 billion on the back of higher volume that more than offset the unfavorable impact from portfolio.

Nutrition & Biosciences: The division’s net sales rose 10% to $1.6 billion on favorable currency impact, benefits from portfolio changes and higher volumes.

Transportation & Advanced Polymers: Net sales went up 10% to $1.3 billion, driven by higher volume and increased local price. Growth was aided by strong demand from the automotive market.

Safety & Construction: Net sales rose 4% to $1.3 billion, supported by higher volume and favorable currency impact.

Financials

DowDuPont had cash and cash equivalents of roughly $13.4 billion at the end of 2017. Long-term debt was roughly $30 billion. Cash flow from operations in the fourth quarter was $4.2 billion.

DowDuPont returned around $2 billion to shareholders in the reported quarter in the form of dividends and share repurchases.

Outlook

DowDuPont noted that it is seeing strong leading indicators of broad-based growth across developed economies including the United States, Germany and France. Moreover, the emerging middle class in developing economies, especially in China and India, continues to support sustainable growth. This augurs well for the company’s products and technologies.

The company realized more than $800 million in annual cost synergy run-rate from its cost synergy programs. It raised its cost synergy commitment from $3 billion to $3.3 billion. DowDuPont will remain committed to achieve the increased cost synergy target and deliver new products from its growth investments and strong innovation pipeline.

The company is also making progress with its plans to eventually break up into three independent companies (in Agriculture, Materials Science and Specialty Products), which is expected within about 14-16 months.

Price Performance

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 12.5% over this period, compared with roughly 15.3% gain recorded by the industry.

Zacks Rank & Stocks to Consider

DowDuPont is a Zacks Rank #2 (Buy) stock.

Other companies worth considering in the basic materials space include Steel Dynamics, Inc. (NASDAQ:STLD) , The Mosaic Company (NYSE:MOS) and Air Products and Chemicals, Inc. (NYSE:APD) , each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Steel Dynamics has an expected long-term earnings growth rate of 12%. Its shares have soared 39.7% in a year’s time.

Mosaic has an expected long-term earnings growth rate of 9.5%. Its shares have rallied 54.5% over a year.

Air Products has an expected long-term earnings growth rate of 14.1%. Its shares rallied 20.9% over a year.

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