How DuPont Could Beat Out Monsanto and Dow Chemical
DuPont will release its quarterly report on Tuesday, and the Dow component has climbed to levels not seen since the turn of the millennium. With plans for a major strategic shift, DuPont earnings should benefit from an increased emphasis on its more lucrative business prospects. But will it be able to hold off rivals Monsanto and Dow Chemical as they take similar steps to boost their profits?
DuPont was founded more than two centuries ago as a gunpowder manufacturer, but the chemicals giant has reinvented itself many times throughout its history. Slowly but surely, DuPont has repositioned itself, selling off its car-paint unit to Carlyle Group for almost $5 billion last year and now looking to divest its performance chemicals business as well. By doing so, DuPont will increase the importance of its seed and agricultural chemicals segment, where it's much more exposed to competition from Monsanto and Dow Chemical among others. Let's take an early look at what's been happening with DuPont over the past quarter and what we're likely to see in its report.
Stats on DuPont
Analyst EPS Estimate
Change From Year-Ago EPS
Change From Year-Ago Revenue
Earnings Beats in Past 4 Quarters
Source: Yahoo! Finance.
Can DuPont earnings grow faster than Monsanto and Dow Chemical?
Analysts in recent months have cut their near-term views for DuPont earnings, slicing a dime per share from their third-quarter estimates. But they've boosted their fourth-quarter projections by a similar amount, keeping full-year expectations unchanged. The stock has climbed 5% since mid-July.
DuPont's second-quarter earnings show the reason why it has sought to follow in Monsanto's footsteps. Revenue at its agriculture segment rose 7%, while performance chemicals saw sales drop 15%, causing its operating earnings to plunge by more than half. Weakness in key chemicals like pigment titanium dioxide looked particularly ugly compared to expected growth in bio-engineered seeds, pesticides, and other agricultural products.
DuPont's completion of its acquisition of South Africa's Pannar Seed gives the company an important competitive presence to try to hold off Monsanto. In particular, Pannar makes DuPont a big player in Africa, where corn production has become an important staple for food supplies. Monsanto has been the dominant business in Africa, but DuPont should now be able to wield influence in developing countries like Mozambique and Tanzania as well as the more-developed South African market.
Investors still have to be aware that DuPont, Dow Chemical, and Monsanto all face a pervasive perception of genetically modified organisms in the food supply as being potentially harmful. Despite benefits in fighting resistant pests and weeds from genetic modifications, many worry about the unknown long-term health impacts of eating genetically modified food.
Nevertheless, DuPont provides many other agricultural goods and services. With its Pioneer Field360 service helping with all aspects of farm management and with farm-specific weather services helping farmers understand microclimates in their fields, DuPont has poised to profit wherever it can to help the agricultural industry.
In the DuPont earnings report, watch to see how the company compares with Dow Chemical and Monsanto. DuPont has a strong opportunity to surpass its rivals if it can keep focusing on its best opportunities.
Food will never go out of fashion
DuPont is a great example of how your best investing approach is to choose great companies and stick with them for the long term. The Motley Fool's free report "3 Stocks That Will Help You Retire Rich" names stocks that could help you build long-term wealth and retire well, along with some winning wealth-building strategies that every investor should be aware of. Click here now to keep reading.
Click here to add DuPont to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.
The article How DuPont Could Beat Out Monsanto and Dow Chemical originally appeared on Fool.com.Fool contributor Dan Caplinger has no position in any stocks mentioned. You can follow him on Twitter: @DanCaplinger. The Motley Fool has no position in any of the stocks mentioned. Try any of our Foolish newsletter services free for 30 days. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.