DowDuPont's Guidance Looks Conservative And Could Be Raised Soon

Initiating coverage of
DowDuPont Inc DWDP
, Argus said in a note Tuesday it believes the management guidance for $3 billion in cost synergies and $1 billion in growth synergies over the next 18 months are conservative. Therefore, the firm expects these two metrics to be raised going forward.

DowDuPont was formed on Sept. 1, 2017, from the merger of Dow Chemical Co with E I Du Pont De Nemours And Co. See also: A Look Ahead At DowDuPont's Catalysts Over The Next Year; Analyst Initiates At Buy Related Link: Believing 17% Upside Lies Ahead, Cowen Upgrades DowDuPont _______ Image Credit: By Brian Reading - Own work, CC BY-SA 3.0, via Wikimedia Commons

As such, Argus initiated coverage of DowDuPont with a Buy rating and a $81 price target.

Analyst Bill Selesky noted that DowDuPont now has an industry-leading position in all three operating segments, namely Agriculture, Material Science and Specialty Products. Therefore, the analyst expects the combined company to benefit from its increased size and scale (see Selesky's track record here).

Argus estimates the new DowDupont to report earnings per share of $3.35 for 2017 and $4.06 for 2018, assuming flat to higher global GDP, flat to higher commodity prices and stable global industrial production. The consensus estimates call for earnings per share of $3.31 for 2017 and $4.03 for 2018.

The firm clarified that its price target of $81 implied a potential return of 16 percent, excluding any dividend payment.

"We expect a formal announcement about DWDP's dividend program to be made shortly," the firm said.

Posted In: Analyst ColorLong IdeasNewsGuidancePrice TargetCommoditiesInitiationMarketsAnalyst RatingsTrading IdeasArgusBill Selesky
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