Tuesday, December 12, 2006

DuPont Guarantees Earnings?

DuPont (NYSE:DD) issued updated guidance and guaranteed to the market what their year end and Q4 earnings would be. The stock has run up handsomely since the summer from approximately $40 to slightly over $48 at the end of Nov. Profit taking pressure may have been a factor as the stock weakened slightly in early Dec. Did someone decide something had to be said or done?

DuPont issued some bad news about $200 million pre-tax write offs (actually called investment and streamlining plan) in the Ag and Nutrition division and a more intellectual honest announcement of a $50 million pre-tax write down in the industrial chemicals division.

Stewing the news mosaic DuPont also announced whopping insurance recoveries from asbestos Litigation and Katrina damage. The $60 million pre-tax recovery was not broken down between Asbestos and Katrina and no comment was provided about the possibility of additional recoveries.

The mosaic was bulked up with the whopping announcement of $500 million after-tax reversal of accruals relating to such mundane items as taxes and the poorly understood “repatriation of foreign earnings under the American Jobs Creation Act” The good news was there is a finalization of the foreign earnings issue which was an incredibly large number.

The investor guarantee of earnings comes in the first major paragraph of the press release which states “Including these fourth quarter significant items, the company anticipates 2006 reported earnings per share will be about $3.25 per share.”

You got to love a CFO who has something in his hip pocket that enables the team to get a first down. Where are the boundaries when the company comes out 43 days in advance of the Jan 23, 2007 scheduled announcement and lets the market know there is a virtual lock on the earnings?