Goldman Sachs Upgrades DuPont To Buy

Goldman Sachs has upgraded DuPont DD to Buy after refreshing our financial model and following meetings with management, which increases its confidence in the sustainability of the earnings recovery story. Goldman now expects 2011/12 EPS of $3.60/$4.05 (vs. $3.35/$3.51 prior), driven by emerging markets growth (38% of sales), volumes reaching their prior peak, and increased pricing. Goldman expects impressive margin expansion delivered in 2010 to be extended into 2011/12 as cost management vigilance and global growth continues. Its $56 price target implies 24% return potential 24%, including a 3.5% dividend yield. While DD has enacted cultural change toward a leaner, more accountable organization, some investors remain skeptical that earnings progress reflects only cyclical tailwinds and not the enduring structural change that it observes. In Goldman's opinion, consensus EPS estimates for 2011/12 are too low and do not yet fully incorporate DD's 2012 sales/margin targets, let alone the potential for these targets to be raised. Goldman's 2011/12 EPS estimates are $0.21/$0.40 above current consensus. DD closed Thursday at $46.53