DuPont Reports Preliminary Q1 Outlook, Stock Drops 12%
DuPont de Nemours has provided a preliminary outlook for the first quarter, causing its stock to drop nearly 12%. The company’s forecast for net sales of approximately $2.8 billion is significantly below consensus estimates of $3.04 billion. Adjusted earnings per share (EPS) are also anticipated to be lower than expected, with a range of 63 cents to 65 cents compared to the estimated 88 cents. DuPont attributes these less favorable projections to additional channel inventory destocking and weak demand in China, and expects sales and earnings declines to continue in Q1 2024.
Factors Contributing to DuPont’s Outlook
DuPont de Nemours cites additional channel inventory destocking within its industrial businesses and continued weak demand in China as the main factors contributing to its less favorable outlook. The company states that it expects these trends to persist, leading to sequential sales and earnings declines in the first quarter of 2024. As a result, the projected operating EBITDA is estimated to be approximately $610 million, below the consensus forecast of $746.6 million.
DuPont’s Executive Chairman and CEO Comments on Outlook
Ed Breen, DuPont’s Executive Chairman and Chief Executive Officer, commented on the company’s outlook, saying, “As we finished 2023, we saw additional channel inventory destocking within our industrial businesses as well as continued weak demand in China. We are seeing similar trends continue and expect sequential sales and earnings to decline in the first quarter of 2024, driven by these factors and the absence of certain discrete items which benefited fourth quarter operating EBITDA.“
Preliminary Fourth-Quarter Results and Impairment Charge
In its preliminary fourth-quarter results, DuPont de Nemours expects adjusted EPS to be in line with the consensus at 85 cents to 87 cents. However, preliminary net sales are projected to be slightly lower than the estimated $3 billion, at around $2.90 billion. The company also anticipates a slight decrease in the preliminary operating EBITDA, with a figure of approximately $715 million compared to the estimated $744.9 million. DuPont has identified a triggering event as of December 31 and plans to record an impairment charge in the range of $750 million to $850 million for its Protection Unit.
Positive Outlook for Semiconductor Technologies
Despite the challenges faced by DuPont, the company has noted signs of stabilization within its Semiconductor Technologies division, with a slight sequential sales lift expected in the fourth quarter. Looking ahead to the full year 2024, DuPont projects a sequential improvement in sales in the second quarter and a 10% increase in operating EBITDA, as well as a return to year-over-year sales and earnings growth in the second half of the year. However, the company still expects sequential sales and earnings declines in the first quarter of 2024.
Analyst comment
Negative news.
As an analyst, the market is likely to react negatively to DuPont’s preliminary Q1 outlook, with the stock dropping 12%. The company’s lower-than-expected net sales and adjusted earnings per share, attributed to inventory destocking and weak demand in China, suggest ongoing sales and earnings declines in Q1 2024. The projected operating EBITDA is also below consensus forecasts. However, the company anticipates a positive outlook for its Semiconductor Technologies division and expects a sequential improvement in sales in the second quarter, with a return to year-over-year growth in the second half of the year.
