DuPont (DD) Warms Up To Q4 Earnings: What's In The Cards?

DuPont de Nemours, Inc. (NYSE:DD) is scheduled to come up with fourth-quarter 2019 results, before the opening bell on Jan 30. The company’s results are expected to reflect the impact of weak demand. However, it is likely to have benefited from its cost and productivity actions in the quarter.

DuPont delivered a positive earnings surprise of roughly 1.1% in the third quarter. The company benefited from higher pricing, portfolio actions and cost control amid a challenging macroeconomic environment.

The company’s shares are down 14.8% over the past three months, compared with 1.3% decline recorded by the industry.

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

What do the Estimates Say?

Last month, DuPont reaffirmed its 2019 revenue guidance at $21.5 billion and adjusted earnings per share outlook at $3.77-$3.82. It expects operating EBITDA to be at the lower end of its previously mentioned range on temporary supply-chain disruptions in Safety & Construction, and Electronics & Imaging units.

In October, the company said that it sees 2019 organic sales to be modestly down year over year on weak demand.

The Zacks Consensus Estimate for revenues for the fourth quarter for DuPont is currently pegged at $5,218 million.

Some Factors to Watch For

Soft demand is expected to have impacted the company’s organic sales in the fourth quarter. DuPont faces headwind from weak demand across some of its businesses. Demand weakness in the semiconductor market is affecting volumes in the company’s Electronics & Imaging business unit. Moreover, softness across automotive and electronics end markets are hurting its volumes in Asia and Europe. Weakening global economic conditions and trade tariffs are affecting demand. Weak demand is likely to have hurt DuPont’s fourth-quarter volumes.

DuPont is also expected to have faced currency headwind in the quarter to be reported, which is likely have affected its organic sales and margins. The company, in its third-quarter call, noted that it expects unfavorable currency impact of roughly $45 million for the second half of 2019. Moreover, margins in its nutrition & biosciences and safety & construction units are likely to be hurt by higher manufacturing costs.

However, benefits of pricing improvement initiatives, cost synergy savings and the company’s productivity actions are expected to get reflected on fourth-quarter results. The company achieved roughly $145 million in savings from cost synergies and additional cost actions in the last reported quarter. Additional cost and productivity improvement actions are likely to have contributed to its bottom line in the December quarter. Notably, DuPont expects to deliver more than $500 million in savings for full-year 2019.

Earnings Whispers

Our proven model does not conclusively predict an earnings beat for DuPont this time around. The combination of a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) increases the chances of an earnings beat. But that’s not the case here.

Earnings ESP: Earnings ESP for DuPont is +0.30%. The Zacks Consensus Estimate for the fourth quarter currently stands at 96 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

Zacks Rank: DuPont carries a Zacks Rank #5 (Strong Sell).

Stocks to Consider

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

Bunge Limited (NYSE:BG) , scheduled to release earnings on Feb 12, has an Earnings ESP of +18.18% and carries a Zacks Rank #1. You can see the complete list of today’s Zacks #1 Rank stocks here.

Royal Gold, Inc. (NASDAQ:RGLD) , scheduled to release earnings on Feb 5, has an Earnings ESP of +0.78% and carries a Zacks Rank #1.

Cleveland-Cliffs Inc. (NYSE:CLF) , scheduled to release earnings on Feb 27, has an Earnings ESP of +6.25% and carries a Zacks Rank #2.

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