Chemical Reactions

Today's DuPont can trace its roots back to a gunpowder mill founded in Delaware all the way back in 1802. Needless to say, the company has been through numerous shifts and iterations since then.

Those following what was once the world's largest chemicals company have had a lot to follow in recent years. Just since 2017, DuPont has merged with Dow Chemical then split apart again—this time into DuPont, Dow, and Corteva. It's a lot to keep track of.

Today's DuPont makes specialty materials for end markets including semiconductors, electronics, construction, and protective equipment. But its portfolio overhaul isn't done yet, with the company still shedding old businesses and buying new ones.

DuPont is doing that under the leadership of Ed Breen, formerly of Tyco International. At that gig, Breen spun off what is now TE Connectivity, medical-device company Covidien, which was ultimately bought by Medtronic; and Tyco Fire & Security.

"A bet on DuPont stock is a bet on CEO Ed Breen," Barron's Al Root wrote. "And that seems like a bet worth making right now."

Breen sold DuPont's nutrition and bioscience unit to International Flavors & Fragrances for almost $25 billion in 2020, and there's more to come this year. The goal of all the portfolio reshuffling is to give DuPont exposure to faster-growing industries and businesses.

Here's Al:

Growth is now returning. Sales are expected to grow 6% in 2022. And in November, DuPont announced that it would seek to sell the majority of its Mobility & Materials segment. That deal could be announced in the next few weeks and should fetch about $12 billion, according to RBC analyst Arun Viswanathan. DuPont is also buying Rogers—a supplier to technology and transportation markets with exposure to electric vehicles and 5G wireless infrastructure—for $277 a share, or about $5.2 billion.

DuPont is, essentially, trading a slower-growth business for faster growth. Sales at Rogers have grown at about 7.5% a year for the past five years. Rogers will also boost DuPont’s operating profit margins—currently at about 15%—while enhancing its 'earnings stability,' Breen said when explaining the deal.

There's more work ahead and plenty of execution risk. But DuPont shares appear cheap relative to the market average, and Al argues it's worth going along for the ride with Breen in the driver's seat. 

Read the rest of his analysis on DuPont here.