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Agricultural giant DuPont is surging after cutting its forecast and announcing its CEO will retire

old dupont paint
old dupont paint

(Wikimedia Commons)

DuPont shares spiked as much as 11% on Tuesday morning after the company cut its forecast for full-year earnings and announced CEO Ellen Kullman is leaving.

Kullman will retire on October 16 after 27 years with the company.

And in a note Tuesday, Deutsche Bank analysts wrote that this is great news for shareholders (emphasis added):

"Following the abrupt retirement of CEO Ellen Kullman, the single biggest impediment, in our view, to a break-up of DuPont, and the appointment of Ed Breen, who as CEO of Tyco broke up the company twice, as interim CEO, we believe the likelihood of DuPont being broken up has increased substantially. Notwithstanding a larger than expected earnings miss in 2H15 (announced in conjunction with the CEO transition), we believe the separation of DuPont into an Ag/Nutrition/Biosciences company and a Chemical/Materials company would unlock substantial shareholder value."

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Trian, the hedge fund run by Nelson Peltz that owned a stake in DuPont, had called for a break-up of the company.

In its press release , the company announced that it now expects operating earnings per share of about $2.75, versus $3.10 previously guided.

Behind the lowered guidance is basically one thing: Brazil.

DuPont said, "The revised outlook primarily reflects continued strengthening of the U.S. dollar versus currencies in emerging markets, particularly the Brazilian Real; and a further weakening of agricultural markets, primarily in Brazil."

DuPont added that Brazil's domestic demand for crop protection and seed products was slammed in the third quarter by its weakening economy. With their margins shrinking, farmers are getting more reluctant to grow as much crop as they used to, and it's harder to access credit, according to DuPont.

Brazil's currency has been slammed in the past year with other emerging market currencies, and recently weakened to a record low against the dollar. Standard and Poor's cut Brazil's credit rating to "junk" last month, as the country strives to improve its fiscal situation.

And now, Brazil's struggling economy is hurting DuPont.

The company is speeding up its cost savings plans, and anticipates that it will save $1.3 billion by the end of 2016.

Here's a chart showing the rally in DuPont, which led gains on the Dow:

Screen Shot 2015 10 06 at 10.11.33 AM
Screen Shot 2015 10 06 at 10.11.33 AM

(Google)

NOW WATCH: 13 Surprising Facts About Brazil



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