Updated from 12:10 p.m. EDT
Less than two months after telling investors its earnings were on target to meet year-end forecasts,
, the nation's largest chemical company, said Thursday that its 2000 earnings would be less than Wall Street anticipated due to higher-than-expected energy and raw materials costs.
Investors reacted negatively to the news as shares of DuPont finished Thursday regular trading down $5.19, or 11%, at $41.81.
The company said it would earn between $2.85 and $2.95 a share in 2000, compared with the consensus analyst estimate of $3.01 a share, according to
First Call/Thomson Financial
. Wilmington, Del.-based DuPont earned $2.58 a share last year.
The announcement follows a July
statement in which the company said it would meet targets. In its quarterly earnings statement released July 26, Charles Holliday, DuPont's chairman and chief executive, said: "We are well-positioned to meet raw material cost and currency challenges and remain optimistic that we will achieve the 17% to 20% EPS growth target we set for the company earlier this year."
In Thursday's statement the company modified that view: "Since then, raw materials prices have sharply increased, with oil and U.S. natural gas increasing by more than 20% and 30%, respectively." A weakening euro has also impacted its sales abroad.
The news caught analysts slightly off guard.
"We were a little surprised that they would end up making this announcement," said Alex Hittle, an analyst at
A.G. Edwards & Sons
, especially in the wake of the "vehemence" with which the company said in July it would meet earnings estimates.
"It was triggered by higher oil prices, but certainly those pressures were present then and have been for the year," Hittle said. Hittle has a maintain rating on DuPont, and his firm has no underwriting relationship with the chemical giant.
In its statement, DuPont trumpeted the fact that it will still top last year's earnings by 10% to 14%. However, that doesn't tell the full story.
For the current fiscal year, the company altered its accounting practices to include gains from its pension assets, a change that will had roughly 18 cents to its 2000 EPS figure, according to Hittle. Factor this out, and the company's operating side will grow between 3% and 7% in 2000.
"Analysts, of course, like to see earnings growth driven by the operating side," he said.
Another analyst is maintaining his strong buy rating. Frank Mitsch, who covers DuPont for
, lowered his third-quarter earnings per share to 50 cents from 60 cents, and expects the company's year-end EPS to come in at $2.90 compared with $3.05 he had been expecting. He also lowered his full year 2001 forecast to $3.50 from $3.60. "While clearly disappointed in the negative macroeconomic trend, we view today's announcement as the right step to enhancing management's credibility with investors," wrote Mitsch, in a report released Thursday morning. H&Q has not acted as an underwriter for DuPont.
In an analyst conference call, company officials said they expect at least 10% earnings growth in 2001, according to Hittle. "That is the floor for them," he said.
For the full year, the rise in raw material prices and the declining euro are expected to cost the company $1 billion, DuPont said.
The news from DuPont also weighed on rival
shares, which finished Thursday regular trading down $1.75, or 6%, at $25.69.