Estimates have been surging for DuPont (DD) after the company delivered solid second quarter results and management raised its full-year guidance.
It is a Zacks #1 Rank (Strong Buy) stock.
Based on consensus estimates, analysts are projecting 22% EPS growth in 2011 and 17% growth in 2012. On top of this growth, the company pays a very stable dividend that yields 3.2%.
Company Description
E.I. du Pont de Nemours and Company, or DuPont, is as a science and technology operating in 8 segments:
Agriculture: (29.1% of revenue)
Electronics & Communications: (8.7%)
Industrial Biosciences: (1.0%)
Nutrition & Health: (4.9%)
Performance Chemicals: (19.4%)
Performance Coatings: (10.7%)
Performance Materials: (16.5%)
Safety & Protection: (9.7%)
The company was founded in 1802 and is headquartered in Wilmington, Delaware. It has a market cap of $46.6 billion.
Second Quarter Results
DuPont reported solid second quarter results on July 28. Earnings per share came in at $1.37, beating the Zacks Consensus Estimate by 4 cents. It was a 17% increase over the same quarter in 2011.
Sales rose 19% year-over-year to $10.493 billion, well ahead of the Zacks Consensus Estimate of $9.951 billion. The increase was due in large part to 11% higher local prices. Sales volume rose 2%. Sales in developing markets jumped 29%.
Sales were up across each segment with its largest segment – Agriculture – rising 9.7%. Its next largest segment – Performance Chemicals – rose 27.2%.
Total operating income was up 18.5% as a small contraction in the gross margin was offset from the leveraging of its selling, general and administrative expenses.
Raised Guidance
Management raised its full-year guidance after reporting solid Q2 results. The company now expects to earn between $3.90 and $4.05 per share, up from previous guidance of $3.65-3.85.
This prompted analysts to revise their estimates significantly higher, sending the stock to a Zacks #1 Rank (Strong Buy). This follows the “beat and raise” trend over the last several months as DuPont has delivered 7 consecutive positive earnings surprises:
Despite fears of slow economic growth in the U.S., analysts are projecting strong double-digit earnings growth over the next two years. The 2011 Zacks Consensus Estimate is $4.00, representing 22% growth over 2010 EPS. The 2012 consensus estimate is currently $4.67, corresponding with 17% growth.
Remarkably Stable Dividend
In addition to this growth, DuPont pays a dividend that yields a solid 3.2%. The company hasn’t raised it since 2007, however.
DuPont’s string of dividend payments is truly remarkable. Since it began paying a dividend back in 1904, the company has paid 426 consecutive quarterly dividends. Through two world wars, a depression, several recessions, a financial crisis – quarter after quarter DuPont has continued to pays its shareholders.
The Bottom Line
Shares trade at 12.5x forward earnings, a slight discount to the industry average of 13.1x. This seems very reasonable given the company’s growth prospects over the next two years and its 3.2% dividend yield.
Of course, if another recession is right around the corner, profits could fall sharply along with the share price.
Todd Bunton is the Growth & Income Stock Strategist for Zacks Investment Research.
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