DuPont de Nemours, Inc. DD is expected to gain from its innovation-driven investment, productivity actions and the acquisitions of the Spectrum Plastics Group and Donatelle Plastics amid headwinds from weaker demand in specific businesses.

DD’s shares are up 8.8% over a year against the Zacks Chemicals Diversified industry’s 6.1% decline.
 

Image Source: Zacks Investment Research

Let’s find out why DD stock is worth retaining at the moment.

Productivity, Innovation & Acquisition Aid DuPont Stock

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.

The buyout of Donatelle Plastics also enhances DD’s exposure in healthcare, expanding its expertise in the medical device market segments. The acquisition introduces complementary advanced technologies and capabilities, such as medical device injection molding, liquid silicone rubber processing, precision machining, device assembly and tool building.

DuPont is also 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 about $115 million anticipated in 2024.

DuPont, in May 2024, announced a strategic plan to separate into three distinct, publicly traded companies to unlock value for shareholders and enhance 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. All three resulting companies are anticipated to have strong balance sheets and sufficient capitalization to pursue future growth opportunities.

Weakness in Specific Businesses a Concern for DD

DuPont is exposed to demand softness in certain businesses. The Industrial Solutions business faces volume headwinds within the Kalrez business. Organic sales in Industrial Solutions declined year-over-year in the third quarter due to lower volumes. Headwinds from de-stocking in the Kalrez business are expected to continue in the fourth quarter. While DuPont is seeing a recovery lately, additional volume pressure within its industrial-based businesses is likely to continue in the fourth quarter.

In the Water & Protection unit, DD is seeing lower sales in safety solutions. Organic sales in this business were down by mid-single digits in the third quarter on lower prices and volumes. The business saw lower volumes due to declines in Tyvek medical packaging. The shelter solutions business is also facing headwinds in North American residential construction markets, which is impacting sales. Despite a recovery, volume pressure in these businesses is likely to continue in the fourth quarter.

DuPont de Nemours, Inc. Price and Consensus

DuPont de Nemours, Inc. price-consensus-chart | DuPont de Nemours, Inc. Quote

DD’s Zacks Rank & Other Key Picks

DD currently sports a Zacks Rank #3 (Hold).

Better-ranked stocks in the Basic Materials space are Methanex Corporation MEOH, Axalta Coating Systems Ltd. AXTA and Ingevity Corporation NGVT, each carrying a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for Methanex’s current-year earnings has increased by 20.7% in the past 60 days. MEOH beat the consensus estimate in each of the last four quarters with the average surprise being 101%. Its shares have gained roughly 4% in the past year.

The Zacks Consensus Estimate for Axalta Coating’s current year earnings is pegged at $2.15, indicating a rise of 36.9% from year-ago levels. The Zacks Consensus Estimate for AXTA’s current year earnings has increased 3.9% in the past 60 days. The stock has rallied around 18% in the past year. 

Ingevity beat the consensus estimate in three of the trailing four quarters. In this time frame, it has delivered an earnings surprise of roughly 95.4%, on average. The consensus estimate for NGVT’s current year earnings has increased 15.9% in the past 60 days.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

DuPont de Nemours, Inc. (DD) : Free Stock Analysis Report

Methanex Corporation (MEOH) : Free Stock Analysis Report

Axalta Coating Systems Ltd. (AXTA) : Free Stock Analysis Report

Ingevity Corporation (NGVT) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research