DuPont Well Positioned for Long-Term Profit Growth Despite Near-Term Decline

Strategist

Seth Goldstein

Revenue segments as reported by the company.

Electronics & Industrial

Water & Protection

Corporate & Other

Mobility & Materials

Corporate

Electronics & Imaging

Nutrition & Biosciences

Transportation & Industrial

Safety & Construction

Non-Core

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DuPont de Nemours is a world-renowned specialty chemicals company with a history spanning over 200 years and an ever-evolving portfolio. In the current iteration, DuPont is the specialty chemicals company created in 2019 from the DowDuPont merger and subsequent separations. 

Since being spun off from DowDuPont, DuPont divested its nutrition and biosciences business in early 2021 and roughly 80% of its mobility and materials business in two transactions: one that closed in late 2022, and a second transaction that closed in early November. As a result, DuPont will have two segments based on products and end markets, with the remaining mobility and materials businesses in the corporate and other segment.

DuPont has produced some noteworthy (and high-profit) products over the years. The water and protection segment invented products such as Kevlar, which has wide applications in textiles, safety equipment, and transportation. Tyvek, broadly used in construction materials, also demonstrates DuPont's successful product development. The company has a solid record of innovation, and we think new products will be able to replace earnings as older products fall out of favor.

The electronics and industrial segment (roughly 55% of 2022 pro forma EBITDA excluding divestitures) sells electronic materials, including components for semiconductors and content that allows devices to connect to Wi-Fi or 5G networks. This business should benefit from a long-term growth in semiconductor demand and a shift toward more advanced chips. It should also see growth from a rise in interconnectivity of devices, which will require more electronic components in smartphones, computers, automobiles, and consumer appliances.

The water and protection segment (45%) sells products used for safety, construction and water management and purification. DuPont should benefit from the rise in U.S. housing starts and growing repair and remodel demand. The water business should see demand growth from rising water costs that require increased water recycling technologies as well as the increased need to for water filtration.

Business Strategy & Outlook

We award DuPont a narrow economic moat rating from intangible assets based on the company’s patented portfolio of specialty products. The company’s success developing innovative materials has created a group of patented products that enjoy a premium position in the market. 

For example, in the water and protection business, Kevlar, a proprietary product, has become the material of choice for military and law enforcement safety and protection. Similarly, Nomex is the material of choice for firefighters due to its heat resistant properties. Tyvek is the market-leading housewrap material. For these products and others, DuPont develops multiple versions for end markets, with products such as Kevlar and Nomex being used in both consumer and industrial applications. Even when a product goes off patent, the company creates new applications for that product that allow premium prices to be maintained. Although Kevlar started as a material used for safety and protection, the material is now used in aerospace and automotive vehicles, consumer products, fiber optics, and in adhesives, sealants, and coatings.

All in all, we think DuPont has proved its ability to continually generate new products. This keeps profit margins elevated as patents expire and competitors develop generic substitutes. The company's specialty chemicals portfolio, which demands elevated margins, enjoys higher barriers to entry and has stickier customer relationships. We are confident that DuPont will outearn its cost of capital over at least the next 10 years.

Narrow

Economic Moat

DuPont de Nemours

Danisco is a Danish bio-based company with activities in food production, enzymes and other bioproducts as well as a wide variety of pharmaceutical grade excipients. It was formed in 1989 from the largest Danish industrial merger ever of the two old C.F. Tietgen companies Danish Sugar (founded 1872), and Dansk Handels- og Industri Company (Danisco A/S).

Danisco

Solae was an international soy ingredients supplier based in St. Louis, Missouri. Solae was formed as a joint venture between DuPont and Bunge Limited. On May 1, 2012, Solae announced that DuPont had acquired Bunge's 28% share, thus taking full ownership of the company. DuPont then merged Solae's business into Danisco. The company developed food, feed and industrial ingredients, focusing on soy. Many of the studies supporting the Food and Drug Administration-approved health claim were based on research using Solae soy protein.

Solae

DuPont de Nemours, Inc. operates as a holding company engaged in the development of specialty materials, chemicals, and agricultural products. It operates through the following segments: Electronics & Industrial, Water & Protection, and Corporate & Others. The Electronics & Industrial segment supplies differentiated materials and systems for a broad range of consumer electronics including mobile devices, television monitors, personal computers and electronics used in a variety of industries. The Water & Protection segment provides engineered products and integrated systems for a number of industries including worker safety, water purification and separation, aerospace, energy, medical packaging and building materials. The company was founded in 1897 and is headquartered in Wilmington, DE.

Earnings data Q1 2024

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Chemours

Corteva Inc

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Companies agree to pay $110M settlement for PFAS chemicals in Ohio

WILMINGTON, Del., Nov. 29, 2023 /PRNewswire/ -- DuPont de Nemours, Inc. ("DuPont") (NYSE: DD) today announced that DuPont, The Chemours Company (NYSE: CC) and Corteva, Inc. (NYSE: CTVA) (the "Companies") reached a settlement agreement with The State of Ohio designed to benefit Ohio's natural resources and the people of the State of Ohio.

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Air Products and Chemicals

Methanex

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Certification helps drive continuous improvement in producing sustainable DuPont™ Tyvek® applications LUXEMBOURG , Nov. 9, 2023 /PRNewswire/ -- DuPont (NYSE: DD) today announced that it has achieved International Sustainability and Carbon Certification (ISCC) PLUS certification at its DuPont™ Tyvek® manufacturing facility in Luxembourg. ISCC PLUS is a globally recognized certification system for developing sustainable supply chains through the incorporation of bio and/or circular materials.

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DuPont (DD) Opens New Kalrez Manufacturing Site in Delaware

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DuPont de Nemours, Inc. (DD) Q3 2023 Earnings Call Transcript

The headline numbers for DuPont de Nemours (DD) give insight into how the company performed in the quarter ended September 2023, but it may be worthwhile to compare some of its key metrics to Wall Street estimates and the year-ago actuals.

Compared to Estimates, DuPont de Nemours (DD) Q3 Earnings: A Look at Key Metrics

DuPont de Nemours (DD) came out with quarterly earnings of $0.92 per share, beating the Zacks Consensus Estimate of $0.84 per share. This compares to earnings of $0.82 per share a year ago.

DuPont de Nemours (DD) Tops Q3 Earnings Estimates

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DuPont's stock down 1.5% after sales miss and guidance that lags consensus

Third Quarter 2023 Highlights Net Sales of $3.1 billion decreased 8%; organic sales decreased 10% versus year-ago period GAAP Income from continuing operations of $291 million; operating EBITDA of $775 million GAAP EPS from continuing operations of $0.62; adjusted EPS of $0.92 Cash provided by operating activities from continuing operations of $740 million; adjusted free cash flow of $621 million WILMINGTON, Del. , Nov. 1, 2023 /PRNewswire/ -- DuPont (NYSE: DD) announced its financial results(1) for the third quarter ended September 30, 2023.

DuPont Reports Third Quarter 2023 Results

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News for DuPont de Nemours Stock (DD)