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DuPont Stock Soars After CEO Quits And Company Slashes H2 EPS Guidance By Nearly 50%
Several months ago activist Nelson Peltz may lost his proxy fight against DuPont, but in retrospect he may be counting his lucky stars as moments ago the company became only the latest chemical giant to admit the gruesome reality of the global economic slump driven by a historic USD surge, when it not only cut its second half operating EPS from $0.75 to $0.40, in the process also slashing full year operating EPS from a prior guidance of $3.10 to just $2.75 mostly blaming Brazil, but in an even bigger shocker also reported that its CEO and Chairman Ellen Kullman is retiring from the company effective October 16.
First, the reason for the dramatic guidance cut, from the company:
DuPont announced that it now expects operating earnings per share for the full year to be approximately $2.75, compared with the prior guidance of $3.10. The revised outlook primarily reflects continued strengthening of the U.S. dollar versus currencies in emerging markets, particularly the Brazilian Real; and a further weakening of agricultural markets, primarily in Brazil. The new guidance assumes full-year currency impacts of $0.72 per share, versus the prior expectation of approximately $0.60 per share. Excluding the impact of currency, the revised guidance for full-year operating earnings per share, including expected benefits from share repurchases and cost savings, represents an approximately 3 percent increase in operating earnings per share year over year. The company now expects second-half operating earnings per share to be approximately $0.40, compared with the prior guidance of $0.75. Approximately 25 percent of expected second-half operating earnings will be earned in the third quarter. Prior year operating earnings were $3.36 and $0.96 per share for the full year and second-half 2014, respectively. Reconciliations of non-GAAP measures are included at the end of this release.
Demand for crop protection and seed products, primarily in Brazil, further weakened in the third quarter impacted by macroeconomic and competitive pressures. In Brazil, where the planting season is in progress, tighter farmer profit margins and credit are causing growers to be more cautious in their spending. The company is experiencing reduced demand for crop protection products reflecting low insect pressure and lower seed volumes as growers are expected to reduce hybrid corn planted area.
The U.S dollar continues to strengthen versus currencies in emerging markets. The Brazilian Real has declined more than 60 percent year over year and approximately 20 percent since the company reported second-quarter results.
In response to these macro conditions, the company announced that it is accelerating, by one year, its operational redesign cost saving actions and as result, expects to achieve $1.3 billion of savings on a run rate basis by the end of 2016. In addition, the company announced its commitment to achieving additional cost savings as a part of its operational redesign and is targeting approximately $1.6 billion on a run rate basis by the end of 2017. Plans related to the additional cost savings are expected to be finalized in the fourth quarter.
Nick Fanandakis, DuPont's Chief Financial Officer, said, "As macro conditions have deteriorated further, we are intensifying our effort to offset these pressures with further productivity improvements and cost savings, while making disciplined and targeted investments in innovation to increase value for shareholders over the long term. While we are experiencing challenging market conditions this season in Brazil, we continue to see long-term strategic growth opportunities for our products. Over the long term, we believe our pipeline of new products and our portfolio of capabilities position us well in global agriculture markets."
And as for the retirement of Ellen Kullman:
Ellen Kullman, Chair and CEO of DuPont, announced that she will retire from the company effective October 16. On that date, Edward Breen, a current member of the DuPont Board of Directors, will assume the role of Interim Chair and CEO of DuPont. The Board has engaged an executive recruitment firm to identify a full-time replacement.
"Over the past seven years, with the dedication of our entire team, we have transformed this great company by focusing our portfolio, streamlining the organization, and driving innovation that leverages our unique science and engineering capabilities. With a strong foundation in place now is the right time for a new leader to continue to drive the pace of change to capitalize fully on the opportunity ahead," said Kullman. "I want to express my sincere thanks and admiration to all of my DuPont colleagues around the world. I have complete confidence that they will realize the enormous potential of the next generation DuPont."
"We thank Ellen for her extraordinary leadership as Chair and CEO of DuPont. During more than 27 years with the company, Ellen has consistently led constructive change by focusing the organization on identifying and solving our customers' needs. As our Chair and CEO, Ellen led DuPont through the global recession and the dramatic transformation of the last several years with the highest standard of integrity and commitment," said Alexander Cutler, DuPont's Lead Independent Director.
And so despite the just admitted 12% collapse in full year EPS, the stock is surging and is now up 10% on a day in which the company just cut its 2015 EPS by 12%...
... for the simple reason that the market now believes that Nelson Peltz will redouble his "activist" effort to soak up what little free cash flow the company has and lever up the company with even more debt, to distribute the proceeds to shareholders as fast as possible before the next leg down in the global economy.
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1980s greenmailers are now activist investors. Talk about the lying press.
Everything is bullish.
Up is the new down.
Fufuxsayk.
DavidC
Ellen Kullman is now free to run for POTUS.
Or maybe run away with John Boehner.
Has aanyone done a comparison of stock performance of companies run by women vs men from the time the CEO is announced until they are "retired".
I'm sure Meg whitman has
Ive just shit my pants!
damn shame. These vultures will get their comeuppance one day, right?
Warning signs are out. CEOs are "retiring" Ihcan warns shit is hitting the fan, 3 Trillion lost in 3 months, Fed caught in a corner, silver and gold are almost gone. U.S. is losing the Middle East and the petro dollar is slipping through our fingers. We're in free fall...history shows us how bad things can get for nations on the decline.
"Ellen Kullman, Chair and CEO of DuPont, announced that she will retire from the company effective October 16" with a golden parachute, no doubt...
The woman had to make her mark and take the company in a new direction.
"We evolved to a strategy that is focused on science, and ag and nutrition, extending our advanced materials area and then really bringing to life areas like industrial biosciences that I was engaged in over a decade ago."
They started selling their core industrial plants and going after biosciences such as gmo's in agriculture and I am told into the service industry (not sure in what way). The effects hit at the identity of the company not only by outside observers but within the company it became clear that employees were just That and business is business. It was a shock even to those who did not find their factory sold off. The concept of a DuPont factory job for engineers and chemist being a lifetime secure setting was destroyed for the current staff and for those being recruited.
But maybe the gamble will pay off. Right now it looks to be getting shakey, which is a new feeling for DuPont. Maybe she was chasing the exciting new items in industry that looked so today and now.
I think Koch bought a lot of the industrial complexes/factories and then sued DuPont for a billion or so. A billion of so that DuPont was counting on that then went poof into the Koch pocket. Paint had been a staple product of DuPont and at least some of that was sold off, maybe most, to others. So it was not just trying a new direction it was selling off chunks of the company and taking a gamble.
Infucking credible CEO quits cuts forcast stock goes straight up afterhours Every day things make less sense ......
Don't accept the victim card here. Go back and review the proxy battle...Trian revealed too many surprises to the Board and the media. Sure the BOD may have won the vote but they got embarrased. After the vote, they took a victory lap but once the dust settled, they dumped her.
Going out of business or having your CEO jump ship are the most bullish signs of all.
Everything is opposite.
Confirmation that global demand for industrial commodities is in the toilet sends commodity prices skyrocketing.
Remember how the recovery was around the corner in 2009, 2010, 2011, etc.
Weren't we supposed to be growing at 10% or more by now?
Bad news lifting stocks for six straight years seems just a tad insane.
skip
I think the Algos mistook bad news for an individual stock to be bad news for the entire market. After all, more bad overall market news means more demand for QE4, 5, 6, etc.
Dupont works like gubbamint now.
Failure is the new success!!!
ONWARD!!!!
Bad = Good
Crazy = Sane
Sane = Crazy
Dog = Cat
Pig = Cow
Up = Down
Fast = Slow
Smart = Stupid