NEW YORK (TheStreet) -- Shares of E I Du Pont De Nemours (DD) are declining by 2.95% to $66.48 on Wednesday afternoon, after JPMorgan issued a downbeat analyst note on the chemical company's planned spin-off of Chemours, its performance chemical division.
"We regard the spin as a dilutive transaction for the parent company. DuPont will lose roughly $978 million in operating income, or $900 million after eliminating an estimated $75 million in residual costs," the firm said in a note.
JPMorgan is expecting Chemours cash flow generation to be negligible for 2015, resulting in the company having to borrow in order to pay the initial quarterly dividend of $100 million it committed to in September, MarketWatch reports.
JPMorgan has a "neutral" rating on DuPont. The firm thinks it will be difficult for DuPont to grow its 2015 base earnings due to a difficult agricultural and currency environment.
Separately, TheStreet Ratings team rates DU PONT (E I) DE NEMOURS as a Buy with a ratings score of A-. TheStreet Ratings Team has this to say about their recommendation:
"We rate DU PONT (E I) DE NEMOURS (DD) a BUY. This is based on the convergence of positive investment measures, which should help this stock outperform the majority of stocks that we rate. The company's strengths can be seen in multiple areas, such as its largely solid financial position with reasonable debt levels by most measures, reasonable valuation levels, good cash flow from operations, notable return on equity and expanding profit margins. We feel its strengths outweigh the fact that the company has had sub par growth in net income."
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The debt-to-equity ratio is somewhat low, currently at 0.81, and is less than that of the industry average, implying that there has been a relatively successful effort in the management of debt levels. Along with the favorable debt-to-equity ratio, the company maintains an adequate quick ratio of 1.06, which illustrates the ability to avoid short-term cash problems.
- Current return on equity exceeded its ROE from the same quarter one year prior. This is a clear sign of strength within the company. In comparison to other companies in the Chemicals industry and the overall market on the basis of return on equity, DU PONT (E I) DE NEMOURS has underperformed in comparison with the industry average, but has greatly exceeded that of the S&P 500.
- DU PONT (E I) DE NEMOURS's earnings per share declined by 26.6% in the most recent quarter compared to the same quarter a year ago. This company has reported somewhat volatile earnings recently. But, we feel it is poised for EPS growth in the coming year. During the past fiscal year, DU PONT (E I) DE NEMOURS increased its bottom line by earning $3.89 versus $3.04 in the prior year. This year, the market expects an improvement in earnings ($4.00 versus $3.89).
- Net operating cash flow has increased to -$2,123.00 million or 12.30% when compared to the same quarter last year. Despite an increase in cash flow of 12.30%, DU PONT (E I) DE NEMOURS is still growing at a significantly lower rate than the industry average of 101.57%.
- You can view the full analysis from the report here: DD Ratings Report