DuPont: Updating Our Valuation Following Reverse Stock Split

Key Morningstar Metrics for DuPont

• Fair Value Estimate
  : $165.00
• Morningstar Rating
  : ★★★
• Morningstar Economic Moat Rating
  : Narrow
• Morningstar Uncertainty Rating
  : High

DuPont finalized a 1-for-3 reverse stock split that went into effect on June 24.

Why it matters: The stock split impacts DuPont’s share price but not its market capitalization, as the higher post-split prices are directly offset by a lower share count.

The bottom line: We raise our fair value estimate for narrow-moat DuPont to $165 per share.

• If we had only incorporated the reverse stock split, our updated fair value estimate would have been $159, which drove the bulk of the increase. The remaining increase was from a higher revenue growth forecast for both the water and industrial technologies businesses.
• At current prices, we view DuPont shares as slightly undervalued, trading more than 15% below our updated fair value estimate. As such, we view current prices as a good entry point for long-term investors.

Coming up: DuPont will likely report its second-quarter earnings in early August. We expect the company to see volume growth in its water and healthcare businesses. We will also look to see how DuPont is navigating cost inflation resulting from the Middle East conflict.

• Like in the post-pandemic inflationary period, we expect DuPont to be able to raise prices to offset cost inflation. This pricing power underpins our narrow moat rating, as customers will pay up for DuPont’s differentiated products.