DowDuPont Inc. (DWDP – Free Report) , created from the merger of Dow Chemical and DuPont on Aug 31, reported mixed third-quarter results. While the company met our earnings estimate, revenues beat.
Quick Look to Earnings
Earnings per share came in at 55 cents, matching the Zacks Consensus Estimate but increasing 10% from the year-ago earnings. Revenues climbed 7.7% year over year to $18.3 billion and surpassed our estimate of $17.5 billion.
The company remained focused on its $3 billion cost synergy target, stemming from $1 billion in Agriculture, $1.2 billion in Materials Science and $0.8 billion in Specialty Products. These cost savings are expected to generate through procurement savings, layoffs, buildings and facilities consolidation, and shutting down selected assets. Additionally, the company is in the process of integrating the three divisions and their separation into three independent companies. The breakup is expected to take place within 18 months of the merger closing.
Market Impact
Shares of DWDP dropped 1.7% on the day following the earnings announcement. The stock has a Zacks Rank #3 (Hold) and a VGM Style Score of A. Plus it belongs to a solid industry having Zacks Rank in the top 26%, indicating growth potential.
Given this, ETFs having large allocation to this chemical giant will be in focus in the days ahead. The drop in DWDP shares has led to sluggish trading in these ETFs as well. Below, we have highlighted them in detail. These funds have a Zacks ETF Rank #3.
iShares U.S. Basic Materials ETF (IYM – Free Report)
This ETF tracks the Dow Jones U.S. Basic Materials Index and holds 50 stocks in its basket. The fund has AUM of $956.3 million and charges 44 bps in fees and expenses. Volume is good as it exchanges around 182,000 shares a day. DowDuPont occupies the top position in the basket making up for one-fourth of the portfolio. The product is heavily skewed toward the chemical segment with three-fourth of the portfolio, while industrial gases, steel, and metals & mining receive minor allocation each. It lost 0.7% on the day.
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