DuPont (DD) Misses on Both the Top and Bottom Lines, Announces 1,500 Layoffs
Shares of DuPont (DD: Charts, News) slid roughly 8% this week, after the company posted third quarter earnings and revenue that trailed analyst estimates. Wilmington, Delaware-based DuPont earned a mere 1 cent per share, or $10 million, a steep plunge from the 48 cents per share, or $452 million, it earned in the prior year quarter.
Excluding earnings from its lagging auto-paint unit and other one-time charges, DuPont earned 32 cents per share, trailing the average analyst forecast of 47 cents per share on the same basis. Revenue also slid 9% to $7.4 billion, missing estimates. This miss on both the top and bottom lines is DuPont's first miss since the first quarter of 2009. Daily Chart
DuPont piled on the bad news, announcing 1,500 layoffs in the next 18 months and slashing its full-year earnings guidance to a range between $3.25 to $3.30 per share, compared to the $3.55 it earned in fiscal 2012. Half of DuPont's planned job cuts, which account for 2% of the company's workforce of 70,000, are expected to cut $450 million in annual costs. The company also intends to sell its performance coatings unit to private equity firm The Carlyle Group for $4.9 billion.11,000 DuPont employees will also leave with the sale of its performance coatings unit. The company's earnings were adversely impacted by the weakening demand for titanium dioxide - a key ingredient in its paint, coatings, plastic and paper products. Like industrial metals and commodities, the demand for titanium dioxide tends to rise when the global economy is strong. Since 2009, titanium dioxide sales have comprised over 60% of the DuPont's incremental earnings growth. Alembic Global Advisors analyst Hassan Ahmed noted, "If that's cycling down, it seriously jeopardizes (CEO Ellen Kullman)'s earnings growth target and has quite serious ramifications for 2013 and beyond." Despite weak demand for titanium dioxide, DuPont still intends to expand its titanium dioxide plants into Mexico and around the world to increase supply. CEO Ellen Kullman stated that her goal remains to focus on strong areas of growth - such as its agricultural segment, which posted a 4% increase in profit - while cutting costs in weaker segments. DuPont's nutrition and health segment also posted strong sales during the quarter. Although its agriculture and nutrition segments remained positive, DuPont is still reeling from a ruling in August that ordered the company to pay $1 billion in damages to rival Monsanto (MON
) due to alleged patent infringements of its genetically engineered, pesticide-resistant seed technology. DuPont is widely considered a bellwether stock, due to the widespread use of its industrial and agricultural products. As such, the company's poor earnings contributed to a 230 point plunge in the Dow Industrial Average earlier this week. The stock trades at 11.8 times forward earnings with a 5-year PEG ratio of 3.6 - signifying that shares are fundamentally undervalued but are unlikely to rally strongly in the near future. DuPont pays a quarterly dividend of 43 cents per share - a 3.8% yield at current prices. Other News About DD DuPont Cites Weak Quarterly Revenue, Says it Will Cut 1,500 Jobs
DuPont posts weak earnings and guidance. DuPont to Cut 1,500 Jobs as Profit Misses Estimates
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Published on Oct 26, 2012
By Leo Sun