E.I. du Pont de Nemours and Co. (NYSE: DD) has been an unloved stock, and shares of the Dow Jones Industrial Average and the ag-chemicals giant have been battered. In fact, DuPont has been the worst DJIA stock year to date in 2015.
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That may be ready to change, at least that is what JPMorgan thinks. The bulge bracket brokerage firm raised its rating to Overweight from Neutral on Friday. It also assigned a $60.00 price target in its call, versus a prior $58.00 price target.
Before getting into the call, some investors will want to consider what this really means for DuPont shareholders. That $60 target was versus a $53.03 closing price on Thursday.
DuPont has a consensus analyst price target of $62.07, but it also has a 52-week trading range of $52.36 to $76.59. Shares are down about 23% so far in 2015, but they were down only about 12% from this time a year ago.
Even with a share price drop this year already, and even with a drop of almost 20% expected in earnings per share this year to $3.19, DuPont shares are still valued at about 17 times expected earnings against the 2015 consensus estimate. Revenues are expected to be down 18% in 2015, and down 5$ in 2016 — but its earnings per share is expected to rise to $3.56 in 2016 from $3.19 in 2015.
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The driving force here for JPMorgan was that DuPont seems like a stock that is just beaten down too much. Most of its drop has been of late. It is also said to be trading at a value that is half of what high-quality agriculture players have been valued at in buyout offers. Another boost for JPMorgan was DuPont’s $4 billion share buyback.
This is one of those upgrades that may lack a lot of enthusiasm. Many such analyst calls in down and out Dow stocks lack serious conviction. It also implies upside of only 13%, before considering close to a 3% dividend yield.
Investors often have a hard time getting excited about such calls. The problem is that these are the types of analyst calls that precede other calls when there is actually good news again.
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