If no good deed goes unpunished, then maybe it is true that good news from DuPont (NYSE:DD) can often come with a catch. While DuPont is a highly diversified chemicals and materials company, the company's products are all largely inputs for other companies' products. This sets up the good news/bad news dilemma - solid volume growth at DuPont should be reasonable confirmation that economic growth really is recovering, but solid price growth also points to the risk of oncoming cost-push inflation.

IN PICTURES: 5 Tips To Reading The Balance Sheet

DuPont's Third Quarter
DuPont disappointed no one with its sales performance in the third quarter, as revenue rose 17% and surpassed even the highest published analyst estimate. Growth was fueled both by mid-teens volume growth (14%) and mid-single digit price growth (5%).

This revenue growth was not necessarily balanced, however. Agriculture and coatings grew by single-digit amounts (and had the lowest volume-based growth), while electronics, chemicals, materials, and safety/protection all grew in excess of 20% (and all had volume growth above 15%).

Profitability was not nearly so strong, though, as reported pretax income fell more than 15% and EPS fell a bit more than 10%. On a segment basis, the story was a little better - segment pretax income showed a bit of growth, and excluding the pharmaceutical business from each period bumps the growth rate to nearly 33%. The problem with the pharmaceutical business is familiar enough to those who follow the space - patent expiry is taking away the highly profitable contributions of Cozaar and Hyzaar (partnered with Merck (NYSE:MRK)). (For more, see Pharma Patent Trolls: Cheap Drugs At A Steep Price.)

Looking Through DuPont's Earnings
Given DuPont's presence in so many businesses, there are definitely some read-throughs for other companies and industries. Strong performance in photovoltaics backs up the incredible revenue growth seen at solar panel companies like JA Solar (Nasdaq:JASO) and Suntech (NYSE:STP), while strong results in auto coatings is not so surprising given the improvements at automakers like Ford (NYSE:F) and the strong demand in China.

Likewise, companies including Huntsman (NYSE:HUN) (titanium dioxide), Albemarle (NYSE:ALB) and Dow (NYSE:DOW) may all see expectations shaped by DuPont's relatively solid performance.

The Bottom Line
DuPont is yet another one of those large industrial/commodity companies that is seeing solid current growth and a high stock price - high enough, in fact, that it is a little difficult to see major undervaluation in the shares. Although DuPont is not yet at peak earnings (or peak valuation, most likely), those will probably come sooner than some investors expect, as a company like DuPont is usually a better buy when things seem terrible. (For related reading, check out Decoding DuPont Analysis.)

Use the Investopedia Stock Simulator to trade the stocks mentioned in this stock analysis, risk free!

Related Articles
  1. Mutual Funds & ETFs

    The 4 Best Buy-and-Hold ETFs

    Explore detailed analyses of the top buy-and-hold exchange traded funds, and learn about their characteristics, statistics and suitability.
  2. Stock Analysis

    The Biggest Risks of Investing in Netflix Stock

    Examine the current state of Netflix Inc., and learn about three of the major fundamental risks that the company is currently facing.
  3. Stock Analysis

    What Seagate Gains by Acquiring Dot Hill Systems

    Examine the Seagate acquisition of Dot Hill Systems, and learn what Seagate is looking to gain by acquiring Dot Hill's software technology.
  4. Mutual Funds & ETFs

    What Exactly Are Arbitrage Mutual Funds?

    Learn about arbitrage funds and how this type of investment generates profits by taking advantage of price differentials between the cash and futures markets.
  5. Investing News

    Ferrari’s IPO: Ready to Roll or Poor Timing?

    Will Ferrari's shares move fast off the line only to sputter later?
  6. Stock Analysis

    5 Cheap Dividend Stocks for a Bear Market

    Here are five stocks that pay safe dividends and should be at least somewhat resilient to a bear market.
  7. Investing

    How to Win More by Losing Less in Today’s Markets

    The further you fall, the harder it is to climb back up. It’s a universal truth that is painfully apparent in the investing world.
  8. Fundamental Analysis

    Use Options Data To Predict Stock Market Direction

    Options market trading data can provide important insights about the direction of stocks and the overall market. Here’s how to track it.
  9. Stock Analysis

    2 Oil Stocks to Buy Right Now (PSX,TSO)

    Can these two oil stocks buck the trend?
  10. Investing News

    What Alcoa’s (AA) Breakup Means for Investors

    Alcoa plans to split into two companies. Is this a bullish catalyst for investors?
  1. Can working capital be too high?

    A company's working capital ratio can be too high in the sense that an excessively high ratio is generally considered an ... Read Full Answer >>
  2. How do I use discounted cash flow (DCF) to value stock?

    Discounted cash flow (DCF) analysis can be a very helpful tool for analysts and investors in equity valuation. It provides ... Read Full Answer >>
  3. How do dividends affect retained earnings?

    When a company issues a cash dividend to its shareholders, the retained earnings listed on the balance sheet are reduced ... Read Full Answer >>
  4. What is the formula for calculating compound annual growth rate (CAGR) in Excel?

    The compound annual growth rate, or CAGR for short, measures the return on an investment over a certain period of time. Below ... Read Full Answer >>
  5. What is the difference between called-up share capital and paid-up share capital?

    The difference between called-up share capital and paid-up share capital is investors have already paid in full for paid-up ... Read Full Answer >>
  6. When does the fixed charge coverage ratio suggest that a company should stop borrowing ...

    Since the fixed charge coverage ratio indicates the number of times a company is capable of making its fixed charge payments ... Read Full Answer >>

You May Also Like

Trading Center
You are using adblocking software

Want access to all of Investopedia? Add us to your “whitelist”
so you'll never miss a feature!