Jefferies Begins DuPont With Bullish View, Says Optionality, Discipline Create Resilience

Shares of DuPont de Nemours Inc DD have higher resilience to a soft macro environment, given the company’s better operating discipline and “commitment to exploit its freedom to maneuver,” according to Jefferies.

The Analyst

Jefferies’ Laurence Alexander initiated coverage of DuPont de Nemours with a Buy rating and a price target of $85.

The Thesis

The current productivity cycle and DuPont’s strong free cash flows could help the company generate a compounded annual growth rate of 4.1% in sales and 12% in EPS through mid of the next decade, with more than $4 billion in balance sheet flexibility, Alexander said in the initiation note.

DuPont’s shares could be in a “sweet spot” from the fourth quarter of 2019 through the first half of 2020, with potential asset sales lending near-term support and additional support when investors become more risk averse, Alexander said.

Favorable operating leverage and improvements in the merger and acquisition environment should allow DuPont’s shares to benefit from a rally in the chemical sector, “once global leading indicators turn and the macro playbook (rotate into consumer-facing chemicals before industrial chemicals) becomes more favorable as well,” the analyst wrote.

Price Action

Shares of DuPont de Nemours were up 1.48% to $71.53 at the time of publishing.

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