DuPont profits top Wall St view, but revenue lags
NEW YORK (Reuters) - Chemical maker DuPont (DD.N) posted a higher-than-expected 11 percent jump in third-quarter profit on Tuesday, but revenue fell short of Wall Street estimates.
The results from the company, which sells to the automotive, housing, and agricultural sectors, among many others, will probably be seen as an indicator of the chemical industry's health.
While the strong earnings topped analysts' expectations, much of the gain came from about $300 million in cost cuts.
Wall Street typically prefers to see profits generated by sales rather than cost cuts, but that should not be a black eye for capital-intensive companies like DuPont, Sterne Agee analyst Mark Connelly said.
"The operating performance here is pretty credible," he said. "When a basic material company demonstrates substantial cost reductions, it deserves some credit."
DuPont's earnings came the same day the U.S. Commerce Department reported a smaller-than-expected increase in new home construction.
DuPont's Tyvek insulation, as well as products such as Corian, Kevlar and Nomex, are very popular in the construction sector.
The company's stock slumped 2.5 percent to $33.77 in late morning New York Stock Exchange trading, slightly worse than the 1.8 percent drop in the Standard & Poor's chemicals index .GSPPM.
Compared with earlier this year, DuPont said it was seeing demand for products slowly improve.
"With a more streamlined organization, permanent fixed cost reductions, and increased productivity, DuPont is well-positioned to capitalize as markets improve," Chief Executive Officer Ellen Kullman said in a statement.
Net income rose to $409 million, or 45 cents per share, from $367 million, or 40 cents per share, a year earlier. Analysts on average expected 33 cents per share, according to Thomson Reuters I/B/E/S.
Revenue fell 18 percent to $5.96 billion, missing the analysts' average forecast of $6.14 billion.
Revenue fell across all five of the Wilmington, Delaware-based company's segments, including its safety and protection unit.
Across the globe, revenue also fell, although demand in the Asia/Pacific region rose from earlier this year, the company said.
While the low price of glyphosate, a popular herbicide, hurt crop protection sales in the third quarter, sales for all of the agricultural unit's products should rise in the fourth quarter, the company said.
DuPont narrowed its outlook for the full year, and now expects earnings of $1.95 to $2.05 per share, compared with a previous estimate of $1.70 to $2.10.
The company said it would discuss its outlook for 2010 at an investor day set for November 3 in Wilmington.
DuPont peer Dow Chemical (DOW.N) is set to post third-quarter results on Thursday.
(Reporting by Ernest Scheyder; Editing by Lisa Von Ahn and Maureen Bavdek)