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Readers of this space know that the investment bias is toward large-cap companies with demonstrated business models and who have a competitive advantage in established markets, preferably with a favorable global trend as a support. And with the above in mind, DuPont is worth a review.
Change is rarely easy for any corporation, and when you're the size of DuPont, it's an undertaking of epic proportions.
DuPont (NYSE: DD) is the number three chemical maker in the United States. Analysts say DD's restructured business operations, which reduced its business units to five from eight, including an exit from the pharmaceutical and fibers business, should begin to produce results in 2008.
Analysts see 2008 revenue advancing about 4-6%, after a 6.5% gain in 2007. DD agriculture segment will continue to shine, with revenues increasing about 10-12%, aided by strong seed sales. Global chemical demand should offset softness in the U.S. The Reuters F2008/F2009 EPS consensus estimates for DD are $3.44/$3.62.
The risks? DD faces headwinds from the slowing U.S. economy, and higher raw material costs. Market share declines also are expected to continue in DD's corn seed market.
The First Call mean rating for DD is Hold (17 firms) and the mean 2008 target is $52.00 (high: $58, low: $45).
Stock Analysis: DuPont is a moderate-risk stock not suitable for low-risk investors. Investors with an investment horizon longer than two years should be rewarded from DD's shares. Consider a stop loss of $33 if you were to purchase shares in this company.
Disclosure: Lazzaro has no positions in stocks. In addition to private real estate holdings, he owns corporate and municipal bonds, and cash certificates of deposit.
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