Not Every Dupont (DD) Follower Believes in Peltz-Genie
Deutsche Bank's David Begleiter is among a number of analysts that commented on the rumors. In his view, activism could spur major portfolio changes.
"We believe the most likely actions Mr. Peltz could propose for DuPont would be: 1) a breakup of DuPont into two companies with one comprising the Agriculture, Industrial BioSciences and Nutrition & Health segments and the other comprising the Electronic & Communications, Performance Chemicals, Performance Materials and Safety & Protection segments," said Begleiter.
Alternatively, Begleiter thinks activism could prompt DuPont a leveraging up of DuPont's "A" rated balance sheet to repurchase shares. Under a third scenario, it could divest TiO2.
"Based on our discussions with management over the years, we believe DuPont would strongly oppose a breakup of the company as outlined above. As such, we believe it is least likely of the scenarios to occur. In contrast, we believe management would not oppose, and has actually been moving toward the divestiture of TiO2 as its commodity profile no longer fits the science based growth strategies of DuPont," said Begleiter.
Deutsche Bank has a buy rating on DuPont with a price target of $62. Begleite's SOTP valuation is $65.
Not everyone agrees with his assessment.
Goldman's Robert Koort said, "The most common focus we hear from investors on valuation mismatch at DuPont is the Ag business, with competitors trading at about 11x 2014 EBITDA, while DD in aggregate trades at about 9x (including unfunded pension). While not our primary valuation methodology, our SOTP-based analysis shows no upside to our price target."
Goldman has a Neutral rating on DuPont with a price target of only $50.
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 $57.25 yesterday, with a 52 week range of $41.67-$57.68.