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DowDuPont Stock Rose on Better-than-Expected Earnings

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DowDuPont’s Q3 2018 earnings beat estimates

DowDuPont (DWDP) announced its Q3 earnings before the market opened on November 1. It reported adjusted EPS of $0.74, an increase of 34.5% over its pro forma adjusted EPS of $0.55 in Q3 2017. The company beat analysts’ adjusted EPS estimate of $0.72. In this series, we’ll look at DowDuPont’s earnings, revenues, and segment-wise performance.

DWDP’s adjusted EPS excludes several significant items amounting to $0.42 per share and $0.11 per share related to the amortization of intangibles. DWDP’s adjusted EPS growth was driven by higher volumes, better prices, cost-saving synergies, equity earnings, lower pension, OPEB (other post-employment benefits) costs, and a lower tax rate.

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DWDP’s adjusted EPS growth was boosted by better control over operating expenses. DWDP’s cost of goods sold (or COGS) as a percentage of sales fell. DWDP reported COGS of $15.47 billion, representing 76.9% of the revenue, a contraction of 90 basis points over Q3 2017. Similarly, selling, general, and distribution expenses as a percentage of sales improved by 120 basis points on a year-over-year basis. During the quarter, DWDP bought back ~$1 billion in common shares. At the end of the third quarter, DWDP’s outstanding common shares stood at $2.31 billion. DWDP also announced a new $3 billion share repurchase program.

Stock price reaction

DowDuPont (DWDP) stock, which has drastically gone down, received a boost from strong earnings. On the day of the earnings release, DWDP’s stock price gained 8.1% and closed at $58.27. Peers Agco (AGCO), Eastman Chemical (EMN), and Celanese (CE) gained 2.4%, 4.25%, and 2.70%, respectively.

Investors can get indirect exposure to DowDuPont by investing in the iShares U.S. Basic Materials ETF (IYM). IYM invests 27.4% of its portfolio in DowDuPont.

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