DuPont beats its earnings forecast but cuts its outlook and announces the takeover of Rogers Corp for $ 5.2 billion.

Shares of DuPont de Nemours Inc. climbed to a more than two-month high on Tuesday, after the specialty materials and chemicals company beat earnings expectations, with price increases matching inflation raw materials and blaming the semiconductor shortage on its forecast for the full year. .

DD company,
+ 8.05%,
whose brands included Kevlar, Tyvek and Styrofoam, also announced an agreement to buy Rogers Corp. ROG,
+ 29.70%
for $ 5.2 billion in cash and plans to divest a “substantial part” of its Mobility & Materials business, as it seeks to “focus more” on high growth sectors including electric vehicles and systems advanced driving.

The stock rose 4.8% in morning trading, putting it on track for the highest close since August 27. It was also heading for the biggest one-day gain after profits since rising 8.1% after the company released its third quarter 2018 results on November 1, 2018.

For the quarter ended Sept. 30, the company reached net income of $ 391 million, or 75 cents per share, compared with a loss of $ 79 million, or 11 cents per share, during the period. last year. Excluding one-time items, adjusted earnings per share rose 89% to $ 1.15, above the FactSet consensus of $ 1.12.

The bottom line was helped by a 28.9% drop in the number of shares used to calculate EPS, to 523.1 million shares from 734.9 million shares, which CFO Lori Koch said. said on the post-earnings conference call with analysts led to a 33-cent advantage over Adjusted EPS.

Sales rose 17.7% to $ 4.27 billion, beating the FactSet consensus of $ 4.16 billion, with the overall increase aided by a 6% price increase.

Among DuPont’s business segments, electronics and industrial sales grew 21% to $ 1.5 billion, with the acquisition of Laird Performance Materials increasing sales by 11% and the volume growth of 9%; Sales of Water and Protection increased 12% to $ 1.4 billion, while volume increased 9% and prices increased 2%; and Mobility & Materials sales increased 30% to $ 1.3 billion, helped by a 16% price increase and 12% growth in volume.

“We have moved quickly to implement strategic price increases in response to rising raw material costs and will continue these actions in the fourth quarter to deliver a price / cost neutral for the year,” Koch said in a communicated.

Although Koch expects the strong demand trend to continue in the fourth quarter, she said the company is seeing “a deceleration in order patterns resulting from the current global semiconductor shortage,” mainly on automotive markets.

DuPont lowered its annual forecast ranges for adjusted EPS to $ 4.18 to $ 4.22, from $ 4.24 to $ 4.30, and for sales to $ 16.34 billion to $ 16.40 billion. $ from $ 16.45 billion to $ 16.55 billion.

During the post-earnings call with analysts, the company said the forecast reduction was “all automatic”, according to a FactSet transcript, without “any softness elsewhere in the portfolio.”

“[W]We are starting to see the current semiconductor shortage impacting the production capacity of our downstream customers, which is creating some deceleration in order models, mainly in the automotive and markets, where I come from. ‘add that estimates for the second half have been reduced by 70%, “Koch said.

Separately, DuPont announced a deal to buy engineering materials company Rogers for $ 5.2 billion in cash, pushing Rogers shares up 29.4% into record territory.

Under the agreement, which is expected to close in the second quarter of 2022, Rogers shareholders will receive $ 277 in cash for each Rogers share they own. This is a 33.0% premium over Monday’s closing price of $ 208.23, and is 29.5% above the August 30 closing record of $ 213.82.

“We are building an unrivaled portfolio that is ideally positioned to capitalize on the rapid acceleration of demand in high growth markets including electric vehicles, ADAS [advanced driver-assistance systems], 5G telecommunications and clean energy, ”said DuPont CEO Ed Breen.

Breen said the decision to divest much of its Mobility and Materials segment is expected to reduce earnings volatility as the company will have minimal exposure to commodities.

DuPont stock has gained 5.0% year-to-date, while SPDR Materials Select Sector’s XLB exchange-traded fund,
rose 18.3% and the S&P 500 SPX index,
+ 0.41%
increased by 23.2%.

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