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BofA Reacts To Nelson Peltz's DuPont Victory

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Bank of America commented on E I Du Pont De Nemours And Co (NYSE: DD) Monday following the endorsement of Nelson Peltz and John H. Myers as candidates for the board of directors by Institutional Shareholder Services, Inc. (ISS).

Analysts Kevin W. McCarthy and Wei Zhang viewed the news as a positive for Du Pont’s shares as it increased "the likelihood of Trian representation on DuPont’s board" and raised "the potential for acceleration of cost cuts and a possible break-up of DuPont if Trian should ultimately prevail.”

While the analysts noted that Trian claimed to not be “wedded to the idea of a break-up,” it owned 2.7 percent of the company at the end of 2014 and had stated that DuPont’s conglomerate structure was destroying value.

“Trian proposed separating Ag, Nutrition & Health and Industrial Biosciences from Electronics, Performance Materials and Safety & Protection. Performance Chemicals is already being spun-off as Chemours (CC), which Trian applauds along with DuPont’s 'Fresh Start' restructuring initiative and $5bn share repurchase program,” according to the analysts.

McCarthy thought the company would benefit from spinning off Chemours, maintaining cost discipline, lower crude oil prices, volume growth and its “ample financial flexibility.”

The stock, however, appeared to have limited upside potential versus the firm’s coverage cluster, the analysts noted.

Shares recently traded at 18.6x the estimated 2015 EPS of $4.00 and 19.7x pro forma EPS of $3.60 as adjusted for the pending separation of Chemours.

The proxy contest vote was scheduled for May 13.

Bank of America maintained an Underperform rating on the stock with a $76 price target.

E I Du Pont De Nemours And Co recently traded at $75.02, up 0.28 percent.

Latest Ratings for DD

DateFirmActionFromTo
Mar 2017UpgradesHoldBuy
Jan 2017DowngradesBuyHold
Oct 2016Initiates Coverage OnBuy

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Posted-In: Bank of America Institutional Shareholder Services John H. Myers Kevin W. McCarthy Nelson Peltz TrianAnalyst Color Analyst Ratings

 

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