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DuPont (DD) Stock Likely Higher Today, But Upside May Not be Limited

July 23, 2013 8:54 AM EDT Send to a Friend
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Price: $65.90 -0.32%

Rating Summary:
    5 Buy, 15 Hold, 1 Sell

Rating Trend: Down Down

Today's Overall Ratings:
    Up: 24 | Down: 14 | New: 52
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Shares of DuPont (NYSE: DD) moved higher early on Tuesday in the wake of the company's Q2 earnings report. Results were roughly in-line, but importantly DuPont said it was realigning its leadership team to accelerate its integrated science execution across the company and is exploring strategic alternatives for its Performance Chemicals segment.

Commenting, Goldman Sachs analyst Robert Koort said he expects shares to outperform in response to the news. However, he doesn't see upside in DuPont stock.

"We expect DD shares to outperform the group today as investors may be hopeful that a TiO2 divestment may help address valuation mismatches within DD's portfolio, most notably in the Ag business (about 35% of total EBITDA and competitors trading at about 11X 2014E EBITDA) relative to DD’s aggregate multiple at around 9X (including unfunded pension)," said Koort.

"However, unlike more-focused specialty companies like ROC and CYT that have successfully achieved a re-rating by committing to divest their sole commodity businesses, we still find several broad areas of DD's portfolio that should trade well below a “life science" multiple, most notably the commodity Performance Materials business. We therefore see no fundamental upside to DD's valuation multiple on our P/E-based methodology (11.5X 2014 EPS) and our SOTP-based analysis (published July 18, 2013), especially given the strong performance of shares ytd."

Goldman Sachs has a Neutral rating on DuPont with a price target of $50.00

For an analyst ratings summary and ratings history on DuPont (NYSE: DD) click here. For more ratings news on DuPont click here.

Shares of DuPont closed at $57.14 yesterday.




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