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DowDuPont’s Q3 Revenue Grew but Fell Short of Estimates

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DowDuPont’s Q3 2018 revenues

DowDuPont (DWDP) reported Q3 2018 revenues of $20.12 billion, an increase of 10.0% over its pro forma revenues of $18.29 billion in Q3 2017. Analysts expected DWDP to report revenues of ~$20.21 billion. The revenue growth is significant considering the divestitures that Dow Chemical and DuPont made to facilitate the merger.

DWDP witnessed revenue growth across all of its reporting segments. The Material Science segment led with revenue growth of 13%. The Specialty Products segment grew by 8%, while the Agriculture segment revenue grew by 2%. We’ll discuss each of the reporting segments separately in the next few parts. On a geographical basis, all regions witnessed growth led by Asia-Pacific, which grew by double digits, while the other regions grew by single-digit percentages.

The overall revenue growth of 10% was supported by a 5% increase in volumes and a 5% increase in local prices. However, the unfavorable foreign currency didn’t have a major impact on DWDP’s revenue.

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Management comments

Ed Breen, CEO of DowDuPont, said, “Our teams generated strong gains in volume, price and operating EBITDA by continuing to execute our growth strategy, capture cost synergies and drive productivity improvements. Organic sales rose 10 percent, equally driven by volume and local price as customer demand remained strong. We delivered our year-over-year cost synergies and we are again raising our target, now to $3.6 billion. We are also reaffirming our full year 2018 EPS guidance provided in August with our second quarter earnings announcement. Each division is performing well, and we remain on track to complete the intended separations, beginning with Materials Science on April 1, followed by Agriculture and Specialty Products on June 1.”

Outlook

DWDP expects growth to continue given the positive outlook for the global economy. As a result, DWDP expects its revenue to grow in the high single digits in the fourth quarter of 2018.

Investors can hold DWDP by investing in the Materials Select Sector SPDR Fund (XLB), which has invested 29.0% of its portfolio in DowDuPont. The fund also provides exposure to Praxair (PX), LyondellBasell (LYB), and Air Products and Chemicals (APD) with weights of 16.6%, 5.75%, and 5.2%, respectively.

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