Why You Should Retain DuPont Stock in Your Portfolio

DuPont de Nemours, Inc. DD is expected to benefit from its innovation-driven investment, productivity actions and the acquisition of the Spectrum Plastics Group. However, it faces headwinds from certain challenges including weaker demand in specific businesses.

The company's shares are up 13% over a year against a 10.8% decline of its industry.

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Let's find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

DD Gains on Productivity, Innovation & Spectrum Acquisition 

DuPont remains focused on driving growth through innovation and new product development. Its innovation-driven investment is focused on several high-growth areas. DD remains committed to driving returns from its R&D investment.

The company, in August 2023, completed the buyout of leading manufacturer of specialty medical devices and components, Spectrum Plastics Group from AEA Investors for $1.75 billion. The acquisition strengthens DuPont's existing position in stable and fast-growing healthcare end markets. It is also in sync with its focus on high-growth, customer-driven innovation for the healthcare market.

Moreover, DuPont is benefiting from cost synergy savings and productivity improvement actions. The benefits of its structural cost actions are expected to be realized in 2024. DD also continues to implement strategic price increases in the wake of cost inflation. These actions are likely to support its results. DuPont is also executing additional restructuring actions and expects annualized cost savings of $150 million from these measures with around $100 million anticipated in 2024.

DuPont, in May 2024, announced a strategic plan to separate into three distinct, publicly traded companies aimed at unlocking value for shareholders and enhancing operational focus. The proposed separations of the Electronics and Water businesses will be executed in a tax-free manner for DuPont shareholders, resulting in New DuPont, Electronics and Water as independent entities. Each company will benefit from increased agility and focus within their respective industries while maintaining strong balance sheets and attractive financial profiles.

The separations are expected to be completed within 18-24 months, subject to customary conditions and regulatory approvals. These transactions will be tax-free for DD shareholders and will not require a shareholder vote. All three resulting companies are anticipated to have strong balance sheets and sufficient capitalization to pursue future growth opportunities.

Weakness in Water & Industrial Businesses Ails

DD's water business faces challenges from the slowdown in China. Its water solutions business is seeing sales moderation due to softer demand in China resulting from the slowdown in the industrial economy and distributor inventory de-stocking. The company expects de-stocking within industrial-based end markets in the second quarter of 2024. Weaker water demand in China is also likely to continue in the quarter. DuPont sees sales in the Water & Protection unit to decline by high-single digits in second-quarter 2024 factoring in the de-stocking impact in water solutions.

The Industrial Solutions business is also exposed to headwinds from de-stocking within biopharma applications. Organic sales in this business declined roughly 20% year-over-year in the first quarter due to lower volumes resulting from continued channel inventory destocking. DuPont sees additional de-stocking within its industrial-based businesses in the second quarter.

Stocks to Consider

Better-ranked stocks in the basic materials space include Carpenter Technology Corporation, Axalta Coating Systems Ltd. and Cabot Corporation.

Carpenter Technology currently carries a Zacks Rank #1 (Strong Buy). CRS beat the Zacks Consensus Estimate in three of the last four quarters while matching it once, with the average earnings surprise being 15.1%. The company's shares have soared roughly 93% in the past year.

Axalta Coating Systems, carrying a Zacks Rank #2 (Buy), has a projected earnings growth rate of 26.8% for the current year. In the past 60 days, the consensus estimate for AXTA's current-year earnings has been revised upward by 5.9%. The company's shares have gained roughly 6% in the past year.

Cabot currently carries a Zacks Rank #2. CBT has a projected earnings growth rate of 26% for the current fiscal year. The company's shares have rallied around 33% in the past year.

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