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VIDEOTicker Shock: Three Reasons Why Dupont Will Rebound
Tuesday's top stories and stocks with potential to move.
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By the way, I’m not liking this whole market-down thing. I was just getting used to this rally. Unfortunately, it looks like we could have a tough go of it today.
Asian stocks closed lower. The Hang Seng and the Nikkei were both down north of 2%. European stocks were in negative territory earlier this morning as well. And here in the US, we're currently trading lower.
Here's what I’m focused on this morning:
DuPont (DD):
The chemical giant came out with its first-quarter figures. At first blush, all looked cool. It put up $0.54 a share, whereas the Street was looking for $0.52. But (and you knew there was going to be a "but") it turned in revenues of about $6.87 billion - well south of the more than $7 billion the Street had expected.
I thought the real kicker, though, was its earnings outlook. In the release, it offered the following: “The company's 2009 earnings outlook has been revised downward to a range of $1.70 to $2.10 per share, excluding any significant items.”
Note that back in January, along with its fourth-quarter numbers, its outlook was between $2 and $2.50, so that’s a pretty sizable drop.
I think the shares deserve a slap on the wrist because of the outlook. At the same time, I don’t want to discard the company like yesterday’s trash. That’s because:
1. It has a long and respectable operating history, and over the long haul, I think it fares quite well in spite of this.
2. It carries a nice dividend.
3. The Street was at $1.88, so it's not exactly the end of the world.
Merck (MRK):
Rounding out the flurry of first-quarter announcements, the drug giant released its numbers earlier this morning. The bad news:
1. Excluding charges, it earned $0.74, which was $0.03 shy of expectations.
2. Its sales number of roughly $5.39 billion was short of expectations as well.
3. I’ll bet dollars to doughnuts the shares get a slap at the open.
The good news:
1. In the release was the following, regarding its earnings expectations: “The company reiterated its expectations for 2009 non-GAAP EPS to be between $3.15 to $3.30, excluding certain items.”
2. There's no number 2. (Maybe this should be listed under "bad news.")
I think investors need to keep their eye on the bigger picture here, and remember that its planned combination with Schering Plough (SGP) has the potential to be really exciting. Also, if the stock did get pounced on, I’d like to think of it more as an opportunity.
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