DuPont Earnings Preview: Second Quarter 2009

DuPont [[DD]] is scheduled to report their second quarter 2009 results before the market opens on Tuesday, July 21. Based on our analysis, we at are expecting DD to report inline earnings results that meet Wall Street’s consensus expectations.


Analyst Expectations

We are forecasting revenues of $6.99 billion and EPS of $.53. This would represent a 21% decline in revenues from last year’s $8.84 billion in the same period. The current analyst consensus estimates calls for revenues of $7.15 billion and EPS of $.53.


Similar to our call last quarter, we are expecting DuPont to deliver disappointing top-line results while earnings will likely come in close to Wall Street’s expectations. In the first quarter, sales dropped 20% y/y and we have yet to see any evidence to suggest that that trend will improve this quarter. We believe it is more likely that the rate of decline will accelerate to a 21% drop this quarter as the company continues to face tough economic headwinds.


While DuPont looks to be attractively valued based on Wall Street’s consensus 2010 EPS estimates, we believe those estimates may prove to be too optimistic. DuPont is not likely to be an early beneficiary of an economic recovery and won’t see any favorable comps until the fourth quarter of this year. So 20% earnings growth next year may prove to be overly aggressive.


Share Performance

Since the beginning of the year, DuPont’s shares are down less than 1%. In 2008, DD’s shares fell almost 43% and underperformed the 34% decline in the Dow Jones industrial average.



Shares are now trading at 12x consensus 2010 EPS estimates. This is below the relative valuations of their peer group. DuPont’s relatively low valuation and attractive 6.7% dividend yield are likely to attract investors despite the near-term earnings risks.


Recommendation: Hold with a $25 price target.


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