DuPont shares remained flat on Thursday despite positive developments regarding the company’s spinoff plans. Jim Cramer sees more opportunity here. The news management said late Wednesday that DuPont will no longer spin off its water unit into a standalone company. DuPont revealed plans to split into three publicly traded entities just over seven months ago. With the water division no longer being distributed, DuPont said it would speed up the timeline for the spin-off of its electronics business, targeting Nov. 1. “Water remains a strong fit with DuPont’s future as a diversified industrial company and provides the company with a strong platform with growth above GDP,” a spokesperson told CNBC in a statement Thursday. “The water business is well positioned to take advantage of important trends for clean water and sustainable use.” The new, leaner DuPont will include the remaining water and healthcare, advanced mobility and safety and manufacturing businesses. DuPont, the which is planned to to release earnings on Feb. 11 before the opening bell, also reaffirmed its outlook for the fourth quarter and the full year.Despite what the Club sees as positive news, DuPont shares fell modestly on Thursday — continuing a stretch of underperformed relative to the overall market. The stock is down more than 8% over the past six months versus the S&P 500’s nearly 5% gain. DD YTD Mt. DuPont de Nemours (DD) The Big Picture DuPont is not the only struggling Club name looking to make aggressive portfolio moves. In September 2023, Danaher spun off its environmental and applied solutions segment into a water quality and packaging company called Veralto. As an independent, Veralto’s stock got off to a slow start, but has since been trending higher. The club received Veralto shares as part of the demerger because we owned Danaher. But we exited the position in November 2023, not wanting too much exposure to water – as we also owned DuPont – which was going through a rough patch at the time. Most recently, Honeywell said in December that the industrial conglomerate was weighing a plan to separate its high-margin aerospace business from its automation operations after activist investor Elliott Investment Management pushed for a split late last year . Reports last week indicate that a split will happen. Honeywell reports earnings ahead of the bell on February 6. Conclusion With all of this in mind, investors should consider DuPont’s decline an opportune time to buy. That’s because the stock should be trading higher after management reiterated its financial forecast so close to next month’s earnings release. “People thought they were going to miss the quarter. Once you knew they weren’t, you just go buy it,” Jim said Thursday. “It has fundamentally failed.” We thought the stock would have enjoyed a bump in relief, but investors can expect to see 2025 guidance. Selling the water ahead of the rollover would have been the best case scenario because it’s the fastest way for management to extract value. . Spinning off the business to form an independent company was the next best option. It looks like DuPont explored all strategic options and made the decision to keep the business out of the best interest of shareholders, and that may be why there’s a bit of disappointment in the stock on Thursday. Perhaps the stakeholders never hit DuPont’s number. Or perhaps DuPont is waiting for water companies’ valuation multiples to widen after falling over the past six months. Xylem Company is the closest company to DuPont’s water. Antitrust concerns may also have been a possibility. If so, sentiment may change in the near future with incoming President Donald Trump’s administration less likely to block deals than the current administration. “Why open a separate company when you have so many potential bidders for water [unit]” added Jim. Although its valuation is significantly undervalued within the legacy DuPont’s boundaries, water has not been the main driver behind the Club’s investment in DuPont. Jim sees DuPont’s electronics business, which supports the semiconductor industry, as crown jewel since The boom in artificial intelligence has created explosive demand for faster and faster chips DuPont has been and is expected to continue Profit In the third quarter, as part of the electronics unit and DuPont’s industrial, semiconductor technology sales advanced over 20% year-over-year on an organic basis (Jim Cramer’s charity is long DD, HON, DHR. See here for a complete list. of stocks.) 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Dupont corporate headquarters in Wilmington, Delaware.
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DuPont Shares remained flat on Thursday despite positive developments regarding the company’s spinoff plans. Jim Cramer sees more opportunity here.
