Keep Tabs on the Progressively "Seedier" DuPont
Most of us tend to think of DuPont (NYS: DD) as a chemical company, one of the larger members of the sector. The company competes in a similar market as ExxonMobil's chemicals operations and Michigan-based Dow Chemical.
But DuPont, whose founding dates back to the Jefferson administration, when it manufactured gunpowder, has recently exploded into a more substantial role as a purveyor of agricultural products. On that basis, it's perhaps becoming more closely aligned withMonsanto (NYS: MON) , another erstwhile chemicals company now making hay down on the farm.
Indeed, in the first quarter of 2012 DuPont's agriculture operation accounted for 56% of the company's pre-tax operating income, followed by 22% from its next-in-line performance chemicals unit. From my perspective, the expanded agricultural orientation renders DuPont somewhat more impervious to the roller-coaster economic cycles.
The beat goes on
For the most recent quarter, the company posted net income of $1.49 billion, or $1.57 a share, compared to $1.43 billion, or $1.52 a share for the first quarter of 2011. But if you back out $50 million that went to those who experienced tree damage from its Imprelis herbicide, the per-share number elevates to $1.61. The analysts who follow the company had expected a figure closer to $1.55 a share. So you can rank this earnings beat alongside the other solid showings from U.S. companies during this still youthful season. Sales for the quarter rose 12% to $11.3 billion.
All of the company's sectors posted higher pre-tax operating income for the quarter, with the exception of two: Both the performance materials unit and safety and protection unit witnessed softness in volumes due to the slower pace of growth in their industrial markets. The aforementioned agricultural operation managed to expand its revenues by 16% and its operating income before taxes by 18%.
And I'll have a Danish
Geographically, sales in an otherwise weak Europe were up 14% on the contribution from the recent acquisition of Danisco, a maker of food ingredients based in Denmark. And while Asian sales were mostly flat, as automobile manufacturers' appetite for titanium dioxide softened, the company's cash registers in North America and Latin America rang up 13% and 23% more revenues, respectively.
Regarding the dominant agriculture unit, DuPont Executive Vice President James C. Borel, who oversees those operations, noted during the company's post-release call that seed sales in the "first quarter reached $3.2 billion, an increase of 20%." (Fully 78% of agriculture's $4.1 billion total.) He pointed specifically to higher corn sales in North America, along with "impressive results from an early strong start in Europe, and robust Brazil safrinha corn sales." You're likely a student of the corn market if you recognize that "safrinha" refers to a crop that grows outside of the typical summer season.
CEO Ellen Kullman noted during the formal portion of the call that "today we are reaffirming our full-year guidance of $4.20 to $4.40 a share, or 7% to 12% growth. We've had a couple of challenging quarters, but we're now seeing encouraging signs in our markets."
A nicely tied bow
Kullman also essentially spoon-fed those of us who watch the big, changing company, when she said:
What you should take away from the first quarter is that we're off to a good start for the year. We expected slow sequential improvement, and that is what we're seeing. DuPont's well positioned in our markets, and we're executing with focus and discipline. Despite challenging conditions in certain markets, we delivered 12% growth in operating income this quarter.
As a self-ascribed management freak, I'm compelled to note Kullman's strong performance as the company's top executive, a post she inherited near the beginning of 2009. Indeed, while "struggling" may be too strong an adjective, she clearly was handed a company that was less than a shining star when she replaced her predecessor, Charles "Chad" Holliday Jr., an admission that pains me somewhat given Holliday's University of Tennessee degree.
The Foolish bottom line
Given DuPont's strong results and expectations of sequential growth during the year, I'm inclined to urge Fools to keep tabs on the company by adding it to your watchlist. Beyond that, you might note that Thursday appears to be an unofficial "Chemicals Day," with Dow Chemical, ExxonMobil, and Eastman Chemical all scheduled to take center stage and tell us about their quarterly results. Monsanto will also provide an overview of global agriculture on Friday with its own report. Finally, for in-depth analysis on other high-profile earnings announcements, download our special free report "5 Stocks Investors Need to Watch This Earnings Season."
At the time thisarticle was published Fool contributor David Lee Smith doesn't own shares in any of the companies named in this article. Motley Fool newsletter services have recommended creating a modified stock repair against synthetic long position in Monsanto. Motley Fool newsletter services have recommended buying shares of ExxonMobil. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.
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