What Do These Factors Say About DuPont?

With shares of DuPont (NYSE:DD) trading around $52, is DD an OUTPERFORM, WAIT AND SEE or STAY AWAY? Let’s analyze the stock with the relevant sections of our CHEAT SHEET investing framework:

T = Trends for a Stock’s Movement

DuPont operates as a science and technology based company worldwide. Its segments are Agriculture, Electronics & Communications, Industrial Biosciences, Nutrition & Health, Performance Chemicals, Performance Coatings, Performance Materials, Safety & Protection and Pharmaceuticals. DuPont offers products that most companies and consumers require on a daily basis. Through its segments, DuPont is able to fulfill need by providing innovative products in a wide range of industries across the globe.

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T = Technicals on the Stock Chart are Strong

DuPont stock has found long-term value in the $40 to $60 range. Currently, the stock has bounced off of the low end of this value range and is headed towards the top end. Analyzing the price trend and its strength can be done using key simple moving averages. What are the key moving averages? The 50-day (pink), 100-day (blue), and 200-day (yellow) simple moving averages. As seen in the daily price chart below, DuPont is trading above its rising key averages which signal neutral to bullish price action in the near-term.

DD

(Source: Thinkorswim)

Taking a look at the implied volatility (red) and implied volatility skew levels of DuPont options may help determine if investors are bullish, neutral, or bearish.

Implied Volatility (IV)

30-Day IV Percentile

90-Day IV Percentile

DuPont Options

18%

43%

39%

What does this mean? This means that investors or traders are buying a small amount of call and put options contracts, as compared to the last 30 and 90 trading days.

Put IV Skew

Call IV Skew

May Options

Flat

Average

June Options

Flat

Average

As of today, there is an average demand from call buyers or sellers and low demand by put buyers or high demand by put sellers, all neutral to bullish over the next two months. To summarize, investors are buying a small amount of call and put option contracts and are leaning neutral to bullish over the next two months.

On the next page, let’s take a look at the earnings and revenue growth rates and the conclusion…

E = Earnings Are Mixed Quarter-Over-Quarter

Rising stock prices are often strongly correlated with rising earnings and revenue growth rates. Also, the last four quarterly earnings announcement reactions help gauge investor sentiment on DuPont’s stock. What do the last four quarterly earnings and revenue growth (Y-O-Y) figures for DuPont look like and more importantly, how did the markets like these numbers?

2013 Q1

2012 Q4

2012 Q3

2012 Q2

Earnings Growth (Y-O-Y)

-3.11%

-70.42%

-10.42%

-3.10%

Revenue Growth (Y-O-Y)

2.03%

-1.42%

-11.65%

7.53%

Earnings Reaction

4.12%

1.08%

-9.06%

-1.99%

DuPont has seen mixed earnings and revenue figures over the last four quarters. From these figures, the markets are pleased with DuPont’s recent earnings announcements.

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P = Excellent Relative Performance Versus Peers and Sector

How has DuPont stock done relative to its peers, Dow Chemical (NYSE:DOW), Monsanto (NYSE:MON), Syngenta (NYSE:SYT), and sector?

DuPont

Dow Chemical

Monsanto

Syngenta

Sector

Year-to-Date Return

16.88%

-0.18%

9.67%

2.69%

-0.62%

DuPont has been a relative performance leader, year-to-date.

Conclusion

DuPont provides diverse and innovative products to a wide range of growing industries around the world. The stock has found a long-term value range and may currently be headed towards to the top end of this range. Earnings and revenue figures have sent mixed vibes to investors overall, however, investors have been impressed by recent earnings announcements. Relative to its peers and sector, DuPont has led in year-to-date performance by a significant amount. Look for DuPont to continue to OUTPERFORM.

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