Shares of materials giant
DuPont de Nemours
are rising after the company gave disappointing full-year 2024 guidance. That’s the benefit of giving investors a heads up.
Tuesday morning,
DuPont
reported fourth-quarter earnings of 87 cents a share from sales of $2.9 billion, very close to what Wall Street was looking for.
Looking ahead, DuPont expects to generate first-quarter EPS of about 64 cents from sales of $2.8 billion. Coming into the report, Wall Street was looking for looking for 88 cents and $3 billion, respectively. For the full year 2024, DuPont expects to generate EPS of about $3.45 from sales of $12.1 billion. Wall Street was modeling about $4 and $12.8 billion, respectively.
DuPont shares were up 6.8% in early trading Tuesday, while the
S&P 500
and
Nasdaq Composite
were down 0.1% and 0.3%, respectively.
The stock was moving higher Tuesday because some of the bad news was already factored in. DuPont announced the first-quarter shortfall on Jan. 24, blaming a weakening Chinese economy and inventory destocking. Coming into Tuesday trading, shares were down about 18% since then. With the Tuesday gain, DuPont stock, at just above $65 a share, was down about 13% compared with pre-warning levels.
“As we finished 2023, we saw additional channel inventory destocking within our industrial businesses as well as continued weak demand in China,” said CEO Ed Breen in a January news release. “We are seeing similar trends continue and expect sequential sales and earnings to decline in the first quarter of 2024.”
Destocking refers to a situation in which customers don’t order products, choosing instead to work down their inventory levels to preserve cash. It happens more often in a declining economy, and the U.S. industrial economy has been contracting for 15 consecutive months.
As for China, it accounts for roughly 20% of DuPont sales, and its economy has weakened as real estate prices came under pressure. Real estate is a significant source of wealth for Chinese consumers. A weak property market in China is similar to a significant stock market decline in the U.S.
In the current update, Breen added that DuPont continues to “demand stabilization within Semiconductor Technologies and Interconnect Solutions and we remain confident of a broad-based electronics materials recovery in 2024.”
Semiconductor-related sales in the fourth quarter were down a “high single-digit” percentage in 2023, according to the company. Interconnect Solutions sales were down “mid-single-digits.”
“Our Semiconductor Technologies business reported sequential sales growth of 2% in the fourth quarter,” said Breen on his company’s earnings conference call. That’s “the first sign of getting past the bottom in chip production.”
Investors will welcome the turn.
Write to Al Root at [email protected]
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