DuPont stock lagged Thursday despite positive developments about the company’s spinoff plans. Jim Cramer sees more opportunity here. The news Management said late Wednesday that DuPont will no longer separate its water unit into a standalone company. DuPont unveiled plans to split into three publicly traded entities just over seven months ago. With the water division no longer being divested, DuPont said it would expedite the timeline for the spin-off of its electronics business, targeting Nov. 1. “Water remains a strong fit with DuPont’s future as a diversified industrial company and provides the company with a strong platform with above GDP growth,” a spokesperson told CNBC in a statement Thursday. “The water business is well positioned to capitalize on important trends for clean water and sustainable use.” The new, leaner DuPont will include water and its remaining healthcare, advanced mobility, and safety and production businesses. DuPont, which is slated to release earnings on Feb. 11 before the opening bell, also reaffirmed its fourth-quarter and full-year outlook. Despite what the Club views as positive news, DuPont shares dropped modestly Thursday — continuing a stretch of underperformance compared to the overall market. The stock has tumbled more than 8% over the past six months versus the S & P 500’s nearly 5% gain. DD YTD mountain DuPont de Nemours (DD) Big picture DuPont isn’t the only struggling Club name looking to take aggressive portfolio action. In September 2023, Danaher spun off its environmental and applied solutions segment into a water and packaging quality company named Veralto . As a standalone, Veralto stock got off to a slow start but has been trending higher since. The Club got Veralto shares as part of the separation because we owned Danaher. But we exited the position in November 2023, not wanting too much exposure to water — since we also owned DuPont — which at the time was going through a rough patch. More recently, Honeywell said in December that the industrial conglomerate was weighing a plan to split off its high-margin aerospace business from its automation operations after activist investor Elliott Investment Management pushed for a breakup late last year. Reports this past week indicate a breakup will happen. Honeywell reports earnings before the bell on Feb. 6. Bottom line With all of this in mind, investors should consider DuPont’s dip as an opportune time to buy. That’s because the stock should be trading higher after management reiterated its financial forecast so close to next month’s earnings release. “People thought they were going to miss the quarter. As soon as you knew that they weren’t, you just go buy it,” Jim said Thursday. “It has radically underperformed.” We thought the stock would have enjoyed a relief rally, but investors may be waiting to see 2025 guidance. Selling water before the spin would have been the best-case scenario because it is the fastest way for management to bring out value. Spinning the business to form a standalone company was the next best option. It sounds like DuPont explored all strategic options and landed on the decision to keep the business out of the best interest of shareholders, and that might be why there’s some disappointment in the stock on Thursday. Perhaps interested parties never hit DuPont’s number. Or maybe DuPont is waiting for the valuation multiples on water companies to expand after falling over the past six months. The company Xylem is the closest peer to DuPont’s water. Antitrust concerns could have been a possibility too. If that’s the case, sentiment could change in the near future with incoming President Donald Trump’s administration less likely to block deals compared to the current administration. “Why start a separate company when you have so many possible bidders for the water [unit],” Jim added. Although its valuation is significantly undervalued within the confines of legacy DuPont, water has not been the main driver behind the Club’s investment in DuPont. Jim sees DuPont’s electronics business, which supports the semiconductor industry, as the crown jewel since the artificial intelligence boom has created explosive demand for faster and faster chips. DuPont has been and is expected to continue to benefit. In the third quarter , as part of DuPont’s electronics and industrial unit, semiconductor technologies sales advanced over 20% year over year on an organic basis. (Jim Cramer’s Charitable Trust is long DD, HON, DHR. See here for a full list of the stocks.) 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Dupont corporate headquarters in Wilmington, Delaware.
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DuPont stock lagged Thursday despite positive developments about the company’s spinoff plans. Jim Cramer sees more opportunity here.