DuPont shares jumped Tuesday after the Club holding reported a solid set of third-quarter results, raised earnings guidance and told investors that a key catalyst for the stock could arrive sooner than some expected. The report showed why we’ve stuck with DuPont this year despite frustration on its stock performance. Net sales in the three months ended Sept. 30 rose 4.4% year over year to $3.19 billion, a hair short of the $3.2 billion estimate, according to LSEG. Organically, sales were up 3% versus the year-ago period. Adjusted earnings per share (EPS) increased 28.3% year over year to $1.18 per share, exceeding expectations of $1.03 per share, LSEG data showed. Operating EBITDA of $857 million in the quarter came in ahead of the $818 million consensus, according to FactSet. EBITDA — a measure of profitability — is short for earnings before interest, taxes, depreciation, and amortization. Shares rose nearly 6% Tuesday, to nearly $87 a share. DD YTD mountain DuPont’s year-to-date stock performance. Bottom line DuPont delivered a very good report Tuesday that gives us the confidence to reiterate our 1 rating and price target of $100 a share. DuPont’s performance on profitability metrics shined, with the better-than-expected operating EBITDA and earnings results for the quarter compounded by an increase to management’s full-year outlook on both metrics. Profit margin performance was also strong, as was cash flow generation, with transaction-adjusted free cash flow conversion of 130% — a sign of healthy of earnings. DuPont defines that metric as adjusted free cash flow excluding transaction costs associated with its impending business separation divided by adjusted earnings. While sales in its water-and-protection unit came up short of expectations, the miss there was more than offset by the beat in electronics-and-industrial sales. That’s important to note because it means sales at DuPont’s two core units — excluding the corporate-and-other segment — on a combined basis were actually better than expected, helped by recovery in China. The world’s second largest economy has recently been a headwind for DuPont and a host of other U.S. companies doing business there. The corporate-and-other line includes retained businesses from the previous divestiture of DuPont’s mobility-and-materials operations, which aren’t really the focus of investors. It’s also much smaller than its two counterparts. DuPont Why we own it: We added this specialty chemical maker as an industrial way to play the recovery in the semiconductor and electronics industries, which have strong multiyear outlooks due to advancements in AI. The company also is getting past excess inventory issues in a few business lines. More recently, DuPont’s plan to split itself into three separate companies has sweetened the investment case. Competitors : 3M , PPG Industries Portfolio weighting: 3.49% Most recent buy: Aug. 5, 2024 Initiated : Aug. 7, 2023 In addition to the…
Read More: DuPont’s biggest businesses get stronger and a key catalyst may arrive