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Shares of DuPont de Nemours Inc. shot up toward a more than two-month high Tuesday, after the specialty materials and chemicals company beat earnings expectations, as price increases matched raw material inflation, and blamed the semiconductor shortage for its full-year guidance cut.
The company
DD,
which brands included Kevlar, Tyvek and Styrofoam, also announced a deal to buy Rogers Corp.
ROG,
for $5.2 billion in cash and plans to divest a “substantial portion” of its Mobility & Materials business, as it looks to “sharpen its focus” on high-growth sectors, including electric vehicles and advanced driver systems.
The stock rallied 4.8% in morning trading, putting it on track for the highest close since Aug. 27. It was also headed toward the biggest one-day post earnings gain since it ran up 8.1% after the company reported third-quarter 2018 results on Nov. 1, 2018.
For the quarter to Sept. 30, the company swung to net income of $391 million, or 75 cents a share, from a loss of $79 million, or 11 cents a share, in the year-ago period. Excluding nonrecurring items, adjusted earnings per share rose 89% to $1.15, above the FactSet consensus of $1.12.
Bottom-line results were aided by a 28.9% decline in the number of shares used to calculate EPS, to 523.1 million shares from 734.9 million shares, which Chief Financial Officer Lori Koch said in the post-earnings conference call with analysts led to a 33-cent benefit to adjusted EPS.
Sales rose 17.7% to $4.27 billion, beating the FactSet consensus of $4.16 billion, with the overall increase helped by a 6% pricing increase.
Among DuPont’s business segments, sales for Electronics & Industrial rose 21% to $1.5 billion, as the Laird Performance Materials acquisition increased sales by 11% and volume growth was 9%; Water & Protection sales increased 12% to $1.4 billion, as volume grew 9% and prices increased 2%; and Mobility & Materials sales rose 30% to $1.3 billion, aided by a 16% jump in prices and 12% growth in volume.
“We moved quickly to implement strategic price increases in response to rising raw material costs and we will continue these actions in the fourth quarter to deliver neutral price/cost for the year,” Koch said in a statement.
Although Koch expects strong demand trend to continue in the fourth quarter, she said the company is seeing “a deceleration in order patterns stemming from the ongoing global semiconductor ship shortage,” primarily in automotive markets.
DuPont lowered its full-year guidance ranges for adjusted EPS to $4.18 to $4.22 from $4.24 to $4.30, and for sales to $16.34 billion to $16.40 billion from $16.45 billion to $16.55 billion.
On the post-earnings call with analysts, the company indicated the guidance cut was “all auto,” according to a FactSet transcript, with “no softness anywhere else in the portfolio.”
“[W]e are starting to see the ongoing semiconductor ship shortage impact our downstream customers ability to produce, which is creating some deceleration in order patterns, primarily in automotive and markets, where I just added on estimates for the second half have been cut by 70%,” Koch said.
Separately, DuPont announced a deal to buy engineered materials company Rogers for $5.2 billion in cash, sending Rogers’ stock soaring 29.4% into record territory.
Under terms of the deal, which is expected to close in the second quarter of 2022, Rogers shareholders will receive $277 in cash for each Rogers share they own. That represents a 33.0% premium to Monday’s closing price of $208.23, and is 29.5% above the Aug. 30 record close of $213.82.
“We are building an unmatched portfolio that is ideally positioned to capitalize on rapid demand acceleration in high-growth markets, including electric vehicles, ADAS [advanced driver-assistance systems], 5G telecommunications and clean energy,” DuPont Chief Executive Ed Breen said.
Breen said the decision to divest a large part of its Mobility & Materials segment should reduce earnings volatility, as the company will have minimal exposure to commodity feedstocks.
DuPont’s stock has gained 5.0% year to date, while the SPDR Materials Select Sector exchange-traded fund
XLB,
has advanced 18.3% and the S&P 500 index
SPX,
has run up 23.2%.
