DuPont is preparing to spin off electronics. What investors get with the remaining company
Posted by Israel News | Oct 16, 2025 | Health | 0 |
Earlier this week we took a look at the upcoming spinoff of DuPont’s electronics business and what investors will get with the new company Qnity Electronics, which has a major presence in the semiconductor industry. Here’s a look at what will remain of the new DuPont after the planned split on November 1 and the shares beginning separate trading two days later. With electronics no longer in play, the new DuPont will focus on four key markets: healthcare, water and diversified industrial goods. The revenue breakdown is approximately 25% healthcare, 24% construction, 22% water, 16% industrial/aerospace, printing and packaging, and 13% automotive. Healthcare DuPont’s healthcare business posted consistent mid-single-digit organic sales growth with a focus on medical packaging, medical devices, biopharmaceuticals/pharmaceuticals and protective apparel. According to the company, more than 90% of the 25 largest U.S. medical device companies use DuPont’s technology to deliver their most advanced products. The company estimates healthcare as a $13 billion addressable market that is growing faster than gross domestic product. It is led by megatrends such as single-use systems, occupational health and safety requirements, higher-performance materials and miniaturization of medical devices. Water DuPont is a leading player in the water industry, specializing in end markets such as industrial water, municipal water and desalination, life sciences and specialty water, and residential and commercial water. The company also plays an important role in the semiconductor manufacturing process. Over 60% of ultrapure water for semiconductor processes is purified with DuPont replacement resins. The company views its water division as generating consistent mid-single-digit organic revenue growth, operating in a $7 billion addressable market that is growing faster than GDP, led by trends such as freshwater shortages, growth of water-intensive industries, increasing regulation and sustainability. Among these trends, management sees water scarcity and stricter regulatory requirements as the most favorable, with the company’s portfolio focused on both. Recall that DuPont abandoned its planned spin-off of the water sector and decided to keep the business in the new DuPont in order to increase the attractiveness of the new company. Industry The industrial sector is the more cyclical part of the business, whose fortunes are more closely linked to the overall economy. Here, Dupont operates in the construction, automotive, industrial and aerospace sectors, as well as printing and packaging. A leading area is in the automotive sector: all ten of the world’s leading automotive original equipment manufacturers (OEMs) use DuPont adhesives. The transition to electric vehicles plays a role in this, as electric vehicles have about twice the DuPont share compared to internal combustion engine vehicles. In the aerospace industry, 97% of all aircraft use the company’s Vespel parts. The company views its industrial exposure as a $21 billion addressable market, but growth is highly dependent on GDP and the overall economy. The company cited electrification, the housing shortage in the USA, aerospace and sustainability as growth drivers for megatrends. Finances Let’s get to finances. Looking back, Dupont’s net sales increased at a compound annual growth rate of 2.4% from 2019 to 2025, which is in line with the average of a cross-industry peer group provided by the company. This group includes 3M, Parker-Hannifin, Illinois Tool Works, ITT and other club names like Honeywell and Dover. The company’s EBITDA margin in 2025 is slightly below the peer average at 23.6% versus 25.7%. From a valuation perspective, DuPont trades at an enterprise value-to-EBITDA multiple of 11.4, which represents a massive discount to the average comparable multiple of 16.7. EBITDA stands for earnings before interest, taxes, depreciation and amortization. Of course, DuPont’s margins are slightly behind the group’s, but we have always believed that the market discount goes too far. Part of this discount may be related to DuPont’s ongoing liability related to PFAS Forever chemicals, despite the company’s repeated attempts to isolate and mitigate its legal risk. There have also been a lot of moving parts in DuPont’s history over the years. Between mergers, demergers, divestitures and acquisitions, the picture was not always clear. Looking forward, management’s medium-term financial targets include compound annual revenue growth (CAGR) of 3% to 4% through 2028. DuPont’s revenue target calculation is based on 5% organic CAGR growth in the healthcare and water markets and 2% organic CAGR growth in the construction and industrial end markets. In terms of margins, Dupont is targeting a 150 to 200 basis point operating EBITDA margin improvement, driven by net sales growth leverage, reduction in sunk costs related to the spin-off, and benefit from productivity initiatives. As for the bottom line, management is targeting a compound annual growth rate of 8% to 10% of adjusted EPS growth. Excess free cash flow used for mergers and acquisitions (M&A) or stock buybacks would have a positive impact on the earnings growth rate. DD YTD Berg DuPont YTD The company has a long history of active portfolio management. The company has exited the slower-growing, lower-margin business and used its excess cash to acquire longer-term, higher-margin assets. The company most recently announced in August that it would divest its aramid business in a deal valued at $1.8 billion. The Aramids business is home to synthetic fiber brands Kevlar and Nomex, which specialize in areas such as heat resistance and personal protection. We expect management to use the cash proceeds from this sale to expand its healthcare and water businesses. This way, the company should see an improvement in its overall growth rate and margins, which could help the stock be several times closer to its peers in the market. What about the rating? How to value the new Dupont company has sparked an investor debate that isn’t as clear-cut as Qnity’s. In theory, the elimination of a higher-value asset like Qnity should result in some sort of multiple compression for the new DuPont. However, the company is currently trading at a significant discount to its peers across multiple industries. There should be some appreciation for simplified structure and management, but valuing the business will be more of an art than a science. Conclusion: It has been a long 18 months since DuPont announced its plan to separate. During this time, the stock was stuck in so-called spin purgatory, with investors delaying their interest in DuPont until just before the liquidation date. The end of this waiting game is finally near. With the turnaround in sight, we stand by our thesis that the upcoming demerger will allow both new companies to trade at prices closer to their competitors, thereby creating value for shareholders. (Jim Cramer’s Charitable Trust is long DD. A full list of stocks can be found here.) As a subscriber to CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable foundation’s portfolio. 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