DuPont Down 40% Over The Last One Month, Will It Continue To Underperform?

March 23rd, 2020 by Trefis Team

DuPont’s (NYSE:DD) stock has so far underperformed the broader markets in the recent coronavirus and oil price war related market crash. The stock has declined 38% since early February, as compared to a 28% fall for the S&P 500 (through March 20). This can be attributed to fears of recession in the global economy, and the impact of the current crisis on DuPont’s business. The company revised its revenue guidance for Q1 2020 to be in the range of $5.0 billion and 5.1 billion, compared with its prior guidance range of $5.1 billion and $5.2 billion. Going by trends seen during the 2008 crisis, DuPont will likely outperform the broader market, when the current crisis is over, as shown in our interactive dashboard analysis, 2007-08 vs. 2020 Crisis Comparison: DuPont Compared with S&P 500. 

Even before the crisis deepened, DuPont’s stock wasn’t doing well. It was down 20% in the month of January, 2020, and it was down over 15% between June 4, 2019 (after the stock split) to Dec 31, 2019. This compares with 18% growth for the S&P 500 over the same period. This underperformance can largely be attributed to the company’s potential liabilities toward its PFOA, a cancer-linked chemical which was used to make Teflon nonstick coatings. The business is now part of Chemours, and both the companies jointly paid $671 million to settle the lawsuits in Ohio in 2017. Chemours filed a lawsuit against DuPont in 2019, alleging that they were mislead about the extent of liabilities the company would be forced to accept.

Also, in the time of crisis, stocks that are highly leveraged typically don’t fare very well. In the wake of the global coronavirus outbreak, and a meltdown in markets, DuPont’s financial position could have impacted its stock price. The company’s cash is around $1.5 billion, while its debt is around $13.6 billion. While these factors likely led to the correction in DuPont’s stock over the recent past, in this analysis, we take a look at how the company’s stock reacted to the economic crisis of 2008 and compare its performance with the S&P 500.

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DuPont Stock versus S&P 500 Over 2020 Coronavirus/Oil Price War Crisis

  • DuPont’s stock declined by 22.3% between March 9, 2020, and March 20, 2020, and the stock is down by 38.1% since February 1, after the WHO declared a global health emergency.
  • The S&P 500 declined by 22.5% between March 9, 2020 and March 20, 2020 and it has fallen by 28.5% since February 1.
  • We also compare the current coronavirus crash to 4 other market crashes here.

DuPont versus the S&P 500 During 2007-08 Financial Crisis

  • DD stock declined from levels of around $35 in October 2007 (the pre-crisis peak) to $14 in March 2009 (as the markets bottomed out) and recovered to levels of about $26 in early 2010.
  • Through the crisis, DD stock declined over 60% from its approximate pre-crisis peak. This marked a decline slightly higher than the broader S&P, which fell by as much as 51%.
  • DD stock saw massive recovery from the lows, rising by over 86% between March 2009 and January 2010. The growth was much higher than the S&P, which rose by about 48% over the same period.

Conclusion

  • While DuPont stock has declined due to the coronavirus and oil price war crisis, going by trends seen during the 2008 slowdown, it’s likely that it could bounce back strongly, when the crisis winds down, and the growth from lower levels could potentially be higher than the broader S&P.

For more detailed charts and a timeline of the 2008 and 2020 crisis for different stocks, view our interactive dashboard analyses on coronavirus.

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