DuPont de Nemours Inc DD, the diversified specialty chemical company born out of the spin-off of DowDuPont, is "built for success," according to Bank of America Merrill Lynch.
The Analyst
Steve Byrne initiated coverage of DuPont's stock with a Buy rating and $76 price target.
The Thesis
DowDuPont spun itself into three separate companies in April, and the new DuPont includes legacy assets that have been "bolstered" by new high-quality businesses from Dow Chemical and FMC Corp FMC, Byrne said in a July 3 initiation note. (See his track record here.)
Even though the business has seen major adjustments in recent years, there is likely "more to come" in the form of new "discrete opportunities" that generate incremental value creation, the analyst said.
DuPont has already identified assets that generate $2 billion in revenue that could potentially be divested, he said.
The business is led by Executive Chairman Ed Breen, who boasts a track record of leading companies through transformations; committed to remaining with the company so long as he can generate new value, Byrne said.
DuPont deserves credit for meeting a run rate synergy capture of 75% of the total $1.065 billion in cost savings from its combination with Dow Chemical as of the third quarter 2018, the analyst said.
The company could hit the 100% mark by the third quarter of 2019, which implies $450 million in incremental year-over-year cost savings, according to BofA.
Price Action
DuPont shares were down 2.61% at $70.23 at the time of publication Tuesday.
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