This is due to a slowdown in the Chinese economy and a decline in inventories. Investors were seeing a lot of deficits on their trading screens. DuPont stock fell nearly 13% to $65.11 in recent trading.
S&P500
and
Nasdaq Composite
They rose by 0.5% and 0.9%, respectively.
DuPont said Wednesday that it expects adjusted fourth-quarter earnings to be 85 cents to 87 cents per share on revenue of $2.9 billion. Wall Street was looking for 85 cents in earnings and $3 billion in sales. It’s not too bad, but sales were a little lower than expected.
The problem is guidance. DuPont expects first-quarter sales of $2.8 billion and earnings of 63 cents to 65 cents per share. Wall Street is seeking 88 cents and $3 billion, respectively.
Wednesday’s update is not a complete quarterly report. Companies sometimes pre-announce results if they differ materially from Wall Street and investors’ expectations.
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In this example, the variance was negative. Stocks should fall while investors search for answers.
“We ended 2023 with further channel inventory destocking within our industrial business, as well as continued weak demand in China,” CEO Ed Breen said in a news release. said. “We expect similar trends to continue and we expect sales and profits to decline in the first quarter of 2024.”
Destocking refers to a situation where a customer does not order a product and instead chooses to reduce inventory levels to preserve cash. This happens more often during economic downturns, and the U.S. industrial economy has contracted for 14 straight months.
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China accounts for about 20% of DuPont’s sales, but the country’s economy is struggling due to pressures on real estate prices. Real estate is an important source of wealth for Chinese consumers.The downturn in China’s real estate market is similar to the sharp decline in the U.S. stock market.
Citi analyst Patrick Cunningham expected a negative reaction following the update. However, there is some positive information for investors. DuPont’s technology business “remains stable with modest revenue growth in the fourth quarter of 2023,” analysts said in a report Wednesday. “The cost savings associated with the restructuring activities announced last November are expected to be realized in the first quarter of 2024.”
He rates DuPont stock a hold and has a price target of $80. Overall, his 63% of analysts covering DuPont rate the stock a Buy. The average buy rating for S&P 500 stocks is approximately 55%. Analysts’ average price target for DuPont stock is about $83.
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DuPont is scheduled to report its full quarterly results on February 6th. Investors can expect more information about which segments of the company’s business were weakest, which segments were strongest, and when the inventory reduction trend will end.
As of Wednesday’s open, DuPont stock was flat over the past 12 months. The S&P 500 and Nasdaq rose about 21% and 26%, respectively, during the same period.
Email Al Root at allen.root@dowjones.com.