EIDP, Inc. (CTA-PA)·Q3 2016 Earnings Summary

Executive Summary

• Q3 2016 delivered volume-driven top-line growth (+1% to $4.917B) and broad margin expansion, with operating EPS rising to $0.34 from $0.13 YoY and total segment operating earnings up 40% to $607M, despite a GAAP EPS of $0.01 reflecting asset impairment and transaction costs .
• DuPont raised FY2016 operating EPS guidance to $3.25 (from $3.15–$3.20) and updated GAAP EPS to ~$2.71; base tax-rate headwind moderated to ~$0.07/share while currency headwind remained ~$0.15/share .
• Operational strengths included cost reductions (operating costs down 14% ex significant items/non-op pension), volume growth in Performance Materials, Nutrition & Health, and Industrial Biosciences, and improved free cash flow YTD by ~$1.3B versus 2015 .
• Strategic progress on the Dow merger continued; organizational design and synergy plans are finalized, with closing targeted as soon as Q1 2017 if regulators use full timing, and spins ~18 months after closing .
• Key stock narrative catalysts: raised guidance, segment margin expansion, cost savings execution, and merger timeline clarity .

What Went Well and What Went Wrong

• What Went Well

  • “We increased segment operating earnings 40 percent, expanded operating margins in each reportable segment, reduced costs, grew volumes and improved free cash flow… we are raising our operating earnings guidance for the year.” — Ed Breen, Chairman & CEO .
  • Operating margins expanded in all segments; Performance Materials reached its highest operating margin and earnings in six years (28% margin; OE $371M, +17% YoY) on cost savings, China auto demand, and lower product costs .
  • Nutrition & Health OE +32% to $135M; double-digit probiotics growth and cost savings drove 380 bps margin expansion, marking 13 consecutive quarters of YoY margin improvement .

• What Went Wrong

  • GAAP EPS fell to $0.01 (vs $0.14) due to $(280)M charges (asset impairment and transaction costs), including a $(158)M Industrial Biosciences intangible impairment and $(122)M merger-related transaction costs .
  • Electronics & Communications sales down 7% YoY on lower Tedlar film demand and continued consumer electronics weakness (China PV feed-in tariff reduction impact); OE up modestly via cost savings .
  • Agriculture still faced industry headwinds (low commodity prices, tight credit, high inventories); seasonal loss improved but was partially offset by lower crop protection prices and higher product costs .

Financial Results

• Quarterly trend (2016)

• YoY comparison (Q3)

• Segment breakdown (Q3)

• KPIs

• Select segment margins (Operating Earnings Margin %)

Guidance Changes

Earnings Call Themes & Trends

Management Commentary

• Ed Breen emphasized operational momentum and guidance raise: “We increased segment operating earnings 40 percent, expanded operating margins in each reportable segment, reduced costs, grew volumes and improved free cash flow… we are raising our operating earnings guidance for the year” .
• On the Dow merger timeline and synergy readiness: “We developed an organizational design… finalized plans to realize our cost synergies… closing would be expected to occur in the first quarter of 2017 [if regulators use full time]. We expect the intended spins to occur about 18 months after closing” .

Q&A Highlights

• The full earnings call transcript was not available in our document set. Highlights are derived from earnings materials:
  • EPS variance drivers: segment improvement (+$0.15/share), lower tax rate (+$0.04), lower corporate expenses (+$0.03), partially offset by higher interest (−$0.01) and significant items/non-op pension .
  • Segment outlooks: PM expecting low-single-digit sales and earnings increases in 4Q; N&H mid-30% OE growth; E&C flat sales with OE up high-single-digits; PS OE up high-single-digits .

Estimates Context

• Wall Street consensus (S&P Global) for CTA-PA (EIDP, Inc.) Q3 2016 was unavailable due to missing Capital IQ mapping for this ticker, so we cannot provide a formal beat/miss comparison. Values retrieved from S&P Global were not available for this ticker via our tool.

Key Takeaways for Investors

• Operating momentum is broad-based: all reportable segments expanded margins, with PM, N&H, and IB leading earnings growth; this underpins the guidance raise and supports multiple expansion narratives .
• Cost actions are flowing through: operating costs down 14% ex significant items/non-op pension; corporate expenses down 25% ex significant items, providing sustainable EPS tailwinds .
• Agriculture stability with product-cycle strength: Leptra and Zorvec are offsetting macro headwinds; watch timing shifts (Southern US route-to-market and seasonal mix) as they push some seed sales to Q1 2017 .
• Cash and balance sheet: YTD free cash flow improved ~$1.3B; net debt stands at ~$5.8B—monitor capital allocation (dividends, buybacks) and merger-related cash uses .
• Merger timeline clarity reduces event risk: synergy plans are finalized; closing as soon as Q1 2017 and spins ~18 months later provides catalysts and potential re-rating across carve-outs .
• Near-term trading: raised operating EPS, segment margin expansion, and disciplined cost control are positive; headline GAAP EPS impacted by one-time charges—focus on operating trajectory .
• Medium-term thesis: product innovation (probiotics, bioactives, Leptra/Zorvec), structural costs, and post-merger portfolio separation could unlock value across specialty franchises .

Additional Documents Reviewed (Prior Quarters)

• Q2 2016 8-K Press Release and Schedules: Operating EPS $1.24; Net sales $7.061B; total segment OE $1.613B; guidance then $3.15–$3.20 operating EPS and $2.70–$2.75 GAAP; cost savings and currency headwinds detailed .
• Q1 2016 8-K Press Release and Schedules: Operating EPS $1.26; Net sales $7.405B; total segment OE $1.717B; initial 2016 operating EPS guidance raised to $3.05–$3.20; segment commentary and macro headwinds outlined .