Abdelrahman
DuPont Sees Stock Surge on Strong Earnings and AI Market Exposure
Shares of DuPont experienced a significant uptick on Tuesday, driven by robust earnings and revenue that exceeded market expectations. This positive performance can be partially attributed to the company’s involvement in the rapidly expanding artificial intelligence semiconductor sector. Despite a few challenging months, instances like these showcase the reason for our continued investment during quieter periods.
In the fourth quarter, DuPont reported a 6.7% year-over-year increase in net sales, reaching $3.09 billion—slightly above analysts’ predictions of $3.07 billion, according to LSEG data. Adjusted earnings per share (EPS) reached $1.13, surpassing the anticipated 98 cents. Notably, this marked an impressive 29.9% rise in adjusted EPS compared to the previous year, marking the highest quarterly growth rate since the third quarter of 2021.
DuPont’s stock surged approximately 7% on Tuesday, nearing $82 per share, a welcome response from the market following a rocky few months that began shortly after the strong third-quarter earnings report in early November. Between November 7 and Monday’s close, DuPont’s stock had dropped by 12%, while the S&P 500 only gained 1.6%. Additionally, DuPont lagged behind the S&P 500’s materials sector, which saw a 7% decline during the same period.
Positive Market Outlook
The latest quarterly results reinforce our view that DuPont’s planned spin-off of its electronics division later this year could be beneficial for investors. We maintain our buy-equivalent rating with a price target set at $100 per share. The encouraging market reaction mirrors the positive response to third-quarter results back in November. We are optimistic that this time, the share-price gains will not be a fleeting bump.
As the spin-off date approaches—now less than 10 months away—we believe that DuPont shares are poised to break free from what we refer to as “spin purgatory,” a state where investors await a clear catalyst before making their moves.
Why DuPont?
As a specialty chemicals manufacturer, DuPont presents a solid option for capitalizing on the recovery within the semiconductor and electronics industries, which are bolstered by advancements in artificial intelligence. The company is also overcoming excess inventory challenges in certain sectors. Its decision to split into two independent entities further strengthens its fundamental investment appeal, even if the stock has not yet fully reflected this potential.
Among its competitors are well-known firms such as 3M and PPG Industries. As of now, DuPont holds a portfolio weighting of 2.99%, with its most recent purchase made on November 19, 2024, following initial investment on August 7, 2023.
DuPont’s fourth-quarter performance highlighted several commendable improvements. The company not only exceeded expectations in revenue and net earnings but also reported an operating earnings before interest, taxes, depreciation, and amortization (EBITDA) of $807 million, along with an EBITDA margin of 26.1%.
Core Business Segments Thrive
The two primary business segments of DuPont—electronics and industrial, and water and protection—exceeded expectations in terms of revenue and operating EBITDA. The electronics segment achieved organic growth of 10%, while the water and protection sector returned to organic growth for the first time since Q2 2023.
Despite its smaller third segment, labeled "corporate and other," which currently includes retained businesses from the previous divestiture, DuPont’s electronics division continues to benefit from an increasing demand for AI chips and overall recovery in semiconductor demand, notably from China. Notably, DuPont’s AI-related sales surged by approximately 30% in 2024, amounting to over $300 million.
CEO Lori Koch mentioned in a post-earnings discussion that the spin-off is expected to conclude by November 1, ahead of the original schedule when plans were first disclosed in late May 2024. Additionally, recent adjustments to its separation strategy revealed that DuPont intends to retain its water business, which provides filtration and purification solutions, as part of the remaining company.
Future Prospects and Earnings Guidance
Looking ahead, DuPont provided mixed guidance for the first quarter of 2025. Expected net sales are projected at $3.03 billion, slightly below the $3.05 billion estimate, partly due to a 1.5% negative impact from foreign exchange rates. On an organic basis, the company anticipates mid-single-digit growth in sales. Adjusted EPS for the January-March period is expected to reach 95 cents per share, slightly exceeding analyst estimates.
For the full year of 2025, DuPont anticipates sales between $12.8 billion and $12.9 billion, with adjusted EPS ranging from $4.30 to $4.40. These projections reflect an anticipated 1% foreign exchange headwind and an expectation of mid-single-digit organic growth. Operating EBITDA is forecasted to be between $3.325 billion and $3.375 billion.
As always, we emphasize that investing entails risks, and while the outlook for DuPont remains favorable, no specific investment outcomes are guaranteed.
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