Earlier this week, we looked at the upcoming spinoff of DuPont’s electronics business and what investors can get from the new Qnity Electronics, which has a strong foothold in the semiconductor industry. Now, let’s take a look at what’s left of the new DuPont Company after its planned separation on November 1st and separate trading begins two days later. With electronics out of the picture, the new DuPont will focus on four major markets: health care, water, and diverse industries. The revenue mix is ​​approximately 25% healthcare, 24% construction, 22% water, 16% industrial/aerospace, printing and packaging, and 13% automotive. Healthcare DuPont’s healthcare business, which includes medical packaging, medical devices, biopharmaceuticals/pharmaceuticals, and protective clothing, has consistently experienced mid-single-digit organic sales growth. According to the company, more than 90% of the top 25 medical device companies in the United States use DuPont technology to deliver cutting-edge products. The company positions healthcare as a $13 billion addressable market that is growing faster than gross domestic product. This is driven by megatrends such as single-use systems, occupational safety requirements, high-performance materials, and miniaturization of medical devices. Water DuPont is a leading water industry company specializing in end markets such as industrial water, municipal water and desalination, life sciences and specialty, residential and commercial. This business also plays an important role in the semiconductor manufacturing process. More than 60% of ultrapure water for semiconductor processing is purified with DuPont exchange resins. The company sees its water franchise consistently growing mid-single-digit organic sales within a $7 billion addressable market that is growing faster than GDP, driven by trends such as freshwater scarcity, growth in water-intensive industries, increased regulation, and sustainability. Of these trends, management views water scarcity and increased regulatory requirements as the most favorable, and our portfolio is aligned with both. Recall that DuPont decided to cancel plans to spin off its water business and keep the business within the new DuPont in order to increase the attractiveness of the new company. Industry The industrial side is the more cyclical part of the business, and its fate is more closely tied to the broader economy. Here DuPont is involved in construction, automotive, industrial and aerospace, printing and packaging. One area where we are showing leadership is in the automotive sector. All of the world’s top 10 automotive original equipment manufacturers (OEMs) use DuPont adhesives. The shift to electric vehicles is having an impact, with EVs having about twice the DuPont content compared to internal combustion engine vehicles. In the aerospace sector, the company’s Vespel parts are used in 97% of aircraft production. The company views its industry exposure as a $21 billion addressable market, but growth is highly dependent on GDP and the overall economy. Megatrend growth drivers cited by the company include electrification, the U.S. housing shortage, aerospace, and sustainability. Finances Let’s move on to finances. Looking back, DuPont’s net sales grew at a compound annual growth rate of 2.4% from 2019 to 2025, in line with the average of its peers across the multiple industries it serves. This peer set includes 3M, Parker-Hannifin, Illinois Tool Works, ITT, and other club names Honeywell and Dover. The company’s 2025 EBITDA margin is slightly lower than the peer average of 23.6% and 25.7%. From a valuation perspective, DuPont’s enterprise value to EBITDA multiple of 11.4x represents a significant discount compared to its peers’ average multiple of 16.7x. EBITDA represents earnings before interest, taxes, depreciation, and amortization. Granted, DuPont’s margins are a little behind the group, but we always thought the market discount was excessive. Part of this discount may be related to DuPont’s remaining liability for PFAS Forever chemicals, despite DuPont’s multiple efforts to corral and contain the legal exposure. There have also been many moving parts to the DuPont story over the years. The picture is not always clear-cut between mergers, divestitures, divestitures, and acquisitions. Looking to the future, management’s medium-term financial goals call for revenue growth and compound annual growth rate (CAGR) of 3% to 4% through 2028. The calculations behind DuPont’s revenue targets are based on 5% organic CAGR growth in the healthcare and water markets and 2% organic CAGR growth in the construction and industrial end markets. On margins, DuPont aims to improve operating EBITDA margins by 150 to 200 basis points by leveraging gains from net sales growth, stalled cost reductions related to spin, and productivity initiatives. Looking at the bottom line, management is targeting adjusted EPS growth compound annual growth of 8% to 10%. Excess free cash flow used for mergers and acquisitions (M&A) and stock buybacks will increase earnings growth. DD YTD Mountain DuPont YTD The company has a long history of active portfolio management. The company exited slow-growing, low-margin businesses and used excess cash to acquire high-margin assets with long-term growth. Most recently, the company announced in August that it would sell its aramid business in a deal valued at $1.8 billion. The Aramid business is home to Kevlar and Nomex, synthetic fiber brands specializing in areas such as heat resistance and personal protection. We expect management to use the cash proceeds from this sale to expand our healthcare and water businesses. Doing so could help the company improve its overall growth and profit margins, and bring the stock closer to its market peers. What about ratings? How to value the new DuPont has sparked a debate among investors that isn’t as clear-cut as Qnity. In theory, cutting a higher multiple asset like Qnity should result in some form of multiple compression for the new DuPont. However, the company is currently trading at a significant discount compared to its multi-industry peers. Simplified structure and management should be valued to some extent, but how you value your business will be more of an art than a science. Conclusion It has been 18 months since DuPont announced its separation plan. All this time, the stock was stuck in a situation known as spin purgatory, with investors putting off their interest in DuPont until closer to the breakup date. This long-awaited game is finally nearing its end. With bankruptcy looming, our argument is that a future separation will allow the new companies to trade at multiples similar to their peers, thereby creating value for shareholders. (Jim Cramer’s Charitable Trust is a long DD. See here for a complete list of stocks.) As a subscriber to Jim Cramer’s CNBC Investment Club, you will receive trade alerts before Jim makes a trade. After Jim sends a trade alert, he waits 45 minutes before buying or selling stocks in his charitable trust’s portfolio. If Jim talks about a stock on CNBC TV, he will issue a trade alert and then wait 72 hours before executing the trade. The above investment club information is subject to our Terms of Use and Privacy Policy, along with our disclaimer. 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DuPont is preparing to spin off its electronics division. What investors get from the rest of the company
