DuPont DD is set to release its third-quarter 2015 results ahead of the opening bell on Oct 27.  

DuPont’s adjusted earnings for second-quarter 2015 missed the Zacks Consensus Estimate. Profit fell year over year on unfavorable currency swings and lower earnings in the agriculture business. Revenues declined by double-digits and missed expectations.

Let’s see how things are shaping up for this announcement.
 
Factors to Watch For

DuPont, earlier this month, trimmed its earnings outlook for full-year 2015 citing continued strengthening of the U.S. dollar versus currencies in emerging markets, mainly the Brazilian real, and a further softening in the agricultural markets.

The company now sees operating earnings for 2015 to be roughly $2.75 per share, down from its earlier guidance of $3.10 per share. Moreover, DuPont envisions operating earnings for second-half 2015 to be around 40 cents per share, also down from 75 cents expected earlier.

DuPont also announced the retirement of Ellen Kullman as Chair and CEO of the company. Edward Breen took over as Interim Chair and CEO of the company on Oct 16.

DuPont is faced with several headwinds that could affect its September quarter results. As the company derives more than 60% of its sales from overseas markets, a stronger dollar is expected to considerably weigh on its top line in 2015 with most significant impact is expected in the agriculture business.

DuPont saw currency headwinds of 17 cents per share in the second quarter. The company now sees unfavorable currency impact of 72 cents per share on its 2015 earnings, up from 60 cents predicted earlier. Currency headwinds is expected to continue to weigh on the company’s third-quarter earnings.
 
Moreover, DuPont remains exposed to a challenging operating environment in the agricultural market. The company, in early October, said that demand for crop protection and seed products further weakened in the third quarter. Tighter profit margins and credit are making growers in Brazil more cautious in their spending. Lower insect pressure and reduced seed volumes are also contributing to a weakening demand for crop protection products.

Nevertheless, DuPont should gain from its aggressive cost-cutting initiatives. DuPont has accelerated its operational redesign cost reduction actions and now expects to attain $1.3 billion of cost savings on a run rate basis by the end of the next year, a year ahead of earlier expectations. The company is also targeting additional cost savings of roughly $1.6 billion by end-2017. We expect DuPont to provide an update on its company-wide redesign actions in its third-quarter call.

As part of its portfolio optimization actions, DuPont completed the separation of its struggling performance chemicals unit in Jul 2015 through the spin-off of The Chemours Company CC, a leading manufacturer of titanium dioxide (TiO2). The separation marked DuPont's transformation to a company which is more growth-driven, more science intensive and less cyclical.

Earnings Whispers

Our proven model does not conclusively show that DuPont is likely to beat the Zacks Consensus Estimate in the third quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank of #1, 2 or 3 for this to happen. That is not the case here, as you will see below.

Zacks ESP: The Earnings ESP for DuPont is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 10 cents.

Zacks Rank: DuPont’s Zacks Rank #5 (Strong Sell), when combined with a 0.00% ESP, makes surprise prediction difficult. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.

Stocks That Warrant a Look
 
Here are some stocks in the diversified chemicals space that you may want to consider, as our model shows they have the right combination of elements to post an earnings beat this quarter:
 
Stepan Co. SCL has an Earnings ESP of +14.29% and a Zacks Rank #2 (Buy).

Koppers Holdings Inc. KOP has an Earnings ESP of +3.08% and a Zacks Rank #2 (Buy).
 
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