DuPont (DD.N), the largest U.S. chemical maker by market value, said it expects earnings to more than double this quarter as its fast-growing agriculture business overcomes traditional seasonal weakness.
The company said it expects the business, which supplies farmers with seeds, pesticides and fertilizers, to report a small profit this quarter, its first positive fourth quarter in four years.
"The story is going to be all about agriculture," said Piper Jaffray analyst Mike Ritzenthaler.
The first half of the year is typically stronger for DuPont's agriculture business as farmers tend to buy seeds and pesticides for the spring planting season in the northern hemisphere.
DuPont said its fourth quarter is being helped by early shipments of seeds to North American farmers and strong demand in Latin America, where the planting season has just begun.
The growth in DuPont's solar panel parts and Kevlar body armor businesses, which helped it post a higher-than-expected profit in the third quarter, is also expected to continue.
Sales of a metal paste used in solar products rose 42 percent, while sales of Kevlar fiber, used in bullet-proof vests and made famous in Batman comics, shot up 70 percent.
However, sales at its performance chemicals unit, which houses its paint pigment business, fell in the quarter and is expected to continue to lag as high raw material costs and volatile prices more than offset higher sales volumes.
Under Chief Executive Ellen Kullman, DuPont is focusing on agriculture, alternative energy and specialty materials to offset its weak paint pigments business for which it is exploring options.
Kullman said the company was "moving with a sense of urgency" with regard to its performance chemicals business.
The company had made significant progress and was looking at a lot of different options, Kullman said, but declined to give details in a media interview.
"We would be shocked if we get to year-end without some announcement," said Jack Murphy, a portfolio manager at hedge fund Levin Capital Strategies that owns 0.3 percent of DuPont's stock.
PAINT PIGMENTS SALE?
"Kullman's movement to 'right the ship' continues on track. And, given activist shareholder Nelson Peltz's ownership stake, I suspect we'll continue to see ... focus on higher growth and higher valuation metrics," said Eric Linser of Avant-Garde Advisors, a wealth management firm that owns DuPont shares.
Nelson Peltz's Trian Fund Management LP disclosed a stake of 5.78 million shares in DuPont in August, which fueled speculation that the company could be forced to exit the paint pigments business.
"Removing the business from the portfolio is going to cause an upward shift in valuation," Murphy said, adding that the stock could trade in the high $60s if the paint business were to be hived off.
Shares of DuPont, a component of the Dow Jones industrial average, were up more than one percent at $60.28 in Tuesday morning trade on the New York Stock Exchange.
Wilmington, Delaware-based DuPont's total net income rose to $285 million in the third quarter ended September 30, from $5 million a year earlier, when the company recorded charges related to severance and restructuring.
Operating earnings were 45 cents per share. On that basis, analysts on average had expected 41 cents per share, according to Thomson Reuters I/B/E/S.
Revenue rose 5 percent to $7.74 billion, but fell slightly shy of analysts' estimates of $7.78 billion.
(Additional reporting by Sayantani Ghosh in Bangalore; Editing by Sriraj Kalluvila and Savio D'Souza)