Chemicals manufacturer and Dow-30 component DuPont (DD – Free DuPont Stock Report) has reported its first-quarter results. Sales of $9.2 billion were down 9% from a year earlier, due to unfavorable currency movements and changes to the portfolio. Industrywide challenges experienced by the Agriculture and Performance Chemicals businesses also contributed. Cost reductions supported the bottom line, but share earnings of $1.34 came in shy of the $1.58 generated in the first quarter of 2014, as well as our $1.40 estimate.
Performance across business lines was mixed. The Agricultural line benefited from an improved merchandise mix in Pioneer products and pricing actions taken in parts of Europe and Asia, though this was more than offset by lower volumes from an expected reduction in global corn planted area, a decline in insecticide demand in Latin America, and the timing of seed shipments. Meanwhile, results at the Performance Chemicals business were hurt by lower prices and volumes for titanium dioxide. Elsewhere, operating earnings declined modestly at the Nutrition & Health segment, as volume gains and an improved product mix were more than offset by the negative impact of the stronger U.S. dollar. Results were more favorable elsewhere. The Electronics & Communications business reported solid growth in operating earnings, driven by increased demand in consumer electronics and despite competitive pressures affecting Solamet paste. At the Performance Materials line, ethylene volume growth and an improved sales mix more than offset lower ethylene prices. The Safety & Protection business benefited from volume growth from global industrial markets and strong public sector demand in Europe.
The separation of the Performance Chemicals business remains on track for the middle of the current year. After the spinoff, this business would be a publicly traded entity named The Chemours Company. The payment is likely to be around $4 billion, which DuPont intends to return to shareholders within 12 to 18 months following the separation.
On that note, the board of directors has approved a 4% dividend increase. Starting with the June payout, the quarterly dividend will be $0.49 per share. Moderate dividend growth will probably continue in the coming years.
DuPont should deliver a solid performance going forward, though we don't envision growth in the current year. The company expects that the strengthening of the U.S. dollar will hurt earnings per share by around $0.80 for 2015. Lingering macroeconomic weakness should also constrain results. On the bright side, efforts to improve productivity ought to deliver cost savings of approximately $0.40 per share this year. We look for revenues and share earnings of $34 billion and $4.00, respectively, for 2015.
DuPont stock fell moderately following the first-quarter earnings release, leaving this high-quality equity with decent risk-adjusted total return potential out to 2018-2020. DD shares earn high marks for Safety, Financial Strength, and Price Stability, which may tempt conservative, income-seeking investors.
About The Company: DuPont is engaged in science and technology in a range of disciplines, including high performance materials, electronics, safety and security, and biotechnology. The company operates on a global scale, manufacturing a wide range of products for distribution and sale to many different markets, including automotive, construction, agricultural, medical, protective apparel, electronics and nutrition.