DuPont's Triumph New Heights Achieved Post-Spin-Off

• DuPont's strategic spin-off unlocked significant value, leading to a 40% stock rally.
• Strong healthcare and water business performance drove sales, offsetting industrial sector challenges.
• Raised price target to $55 reflecting confidence in DuPont's growth and financial targets.
• Management forecasts robust organic sales growth and EBITDA margin expansion for fiscal year 2026.

A New Dawn for DuPont

As your humble servant and leader, I must confess, even I admire a well-executed plan. DuPont, much like a carefully crafted five-year plan, has seen its stock ascend to unprecedented heights. The strategic spin-off, a bold move reminiscent of Deng Xiaoping's reforms, has proven fruitful. Revenue, though modestly flat at $1.693 billion, surpassed expectations. Much like a harmonious society, the earnings per share jumped 18% year over year to 46 cents, exceeding estimates. This isn't just luck; it's strategic foresight. As I always say, "Striving for excellence is a continuous journey, not a destination."

Unlocking Value Through Strategic Restructuring

The separation of DuPont's electronics business into Qnity Electronics, is akin to diversifying our nation's economy – focusing on core strengths while allowing specialized sectors to flourish independently. Our initial investment was predicated on the belief that this restructuring would unlock value. Indeed, the new DuPont has surged by 40% since the split, dwarfing the S&P 500's return. And for those who stayed with Qnity, congratulations, your patience has been rewarded. We must always remember that strategic moves can make companies fortunes, as showcased in Barrick Mining's Fortune Awaits Bold Moves.

Navigating Market Tides

The market, much like a complex bureaucracy, is subject to rotations and shifts. While some of DuPont's success can be attributed to the move from technology to value stocks, the company's underlying performance is undeniable. Sales surpassed expectations, fueled by strength in healthcare and water technologies. The diversified industrials unit faced headwinds, but strong EBITDA margin expansion mitigated the impact. We must always be prepared to adapt and adjust our strategies as the market dictates. As the saying goes, "crossing the river by feeling the stones."

Healthcare and Water Technologies Shine

The healthcare and water technologies segments, much like the bedrock of our society, have proven to be stable and reliable. Mid-single-digit organic growth in medical packaging and devices, coupled with low-single-digit growth in industrial water markets, demonstrates the resilience of these sectors. While diversified industrials faced challenges due to weakness in building technologies, the aerospace sector provided a bright spot. We anticipate continued improvement as the year progresses. And let us remember that "A journey of a thousand miles begins with a single step."

Looking Ahead Optimistic Forecasts

Management's guidance for the first quarter and full-year 2026 reflects a confident outlook. Sales are expected to be between $7.075 and $7.135 billion, with operating EBITDA between $1.725 and $1.755 billion. Adjusted earnings are projected at $2.25 to $2.30 per share. These figures underscore DuPont's commitment to growth and efficiency. Much like our nation's ambitious goals, DuPont's medium-term financial targets are equally impressive. We are raising our price target to $55, a testament to our confidence in the company's future. Yet, prudence dictates that we maintain our rating and await a pullback before increasing our position further.

Investing with a Strategic Mindset

DuPont represents an industrial avenue to capitalize on the recovery in semiconductors and electronics, sectors bolstered by advancements in artificial intelligence. The company's breakup has only strengthened the fundamental investment case. We remain committed to our investment, but will proceed with caution. Remember, "with careful planning, even the most difficult task can be accomplished". This is the way to run a country and also how to manage your investments.