DuPont’s first quarter performance exceeded expectations, with adjusted earnings per share (EPS) coming in at 79 cents, surpassing LSEG’s estimate of 65 cents and management’s guidance of 63 cents to 65 cents. Organic sales declined 6% year over year to $2.9 billion, exceeding expectations of $2.8 billion. The Electronics & Industrial business remained a key driver of growth, with organic sales declining 2% year over year due to a decrease in volume and pricing. However, Semiconductor Technologies sales rose 10% thanks to the start of the recovery in semiconductor demand, which is expected to increase throughout the year.
Interconnect Solutions sales increased by mid-single digits, representing the second consecutive quarter of year-over-year volume growth as the broad electronic markets bounced back. The one problem child is still Industrial Solutions, where sales fell about 20% due to destocking of its Kalrez O-rings and the products line within biopharma. On the bright side, DuPont expects orders to improve over the next several quarters in Kalrez while biopharma’s recovery is expected later in the second half of the year.
At Water & Protection, organic sales fell 10% due to lower volumes. Within that segment, Safety Solutions sales fell in the low teens on volumes as the channel worked through inventory destocking, mostly for Tyvek medical packaging products. The good news is that management believes its customers’ inventory is nearing normalization. At Water Solutions, organic sales were down in the mid-teens on lower volumes due to distributor inventory destocking and weaker industrial demand. But as we’ve pointed out over the last few months, orders have been picking up which leads Breen to believe the destock is bottoming and will begin to recover in the second quarter. And in Shelter Solutions, the destock looks complete after sales were flat in the first quarter and expected to rise sequentially in the second quarter.
Following the better-than-expected first quarter and the positive order trends across its businesses, DuPont raised its outlook for the full year. It now expects net sales to be in the range of $12.1 billion to $12.4 billion, above the Street’s expectations of $12.1 billion. This new outlook reflects a continued electronics recovery and some easing of channel inventory destocking in industrial-based businesses. The operating EBITDA outlook was raised to a range of $2.9 to $3.05 billion, which is above Street estimates of about $2.9 billion. In addition, management raised its adjusted EPS outlook by $0.20 at the low end and $0.10 at the high end to the range of $3.45 to $3.75. This is well above analysts’ estimates of $3.44. The outlook assumes a return to year-over-year sales and earnings growth in the second half of the year, driven by the ongoing electronics market recovery and return to volume growth in its water and protection business.
