Loving You To Pieces – DuPont Splits To Drive Value, More Global Chemical Sector Break-ups Likely

Key Findings

General Thoughts: We discuss the DowDuPont break-up in 2019, and the now proposed DuPont separation into three companies – attractive sum-of-the-parts valuations do not ensure post-split relative outperformance.
Supply Chain/Commodities: We view the three businesses set to form with the proposed DuPont separation as attractive, though we view its water business as among its most globally underappreciated and attractive pieces.
Energy/Upstream: Global natural gas prices have surged higher in May relative to Crude Oil, and this has been a major development on our mind, as it suggests US chemical margins face downward pressure relative to 1Q24.
Sustainability/Energy Transition: We discuss the high expectations surrounding clean hydrogen production this decade, though we observe more net risk to forecasts in the West relative to China that could beat expectations.
Downstream/Other Chemicals: We highlight US home sale weakness amid low inventory levels, which supports home prices and domestic homeowner equity, and strength in North American rail traffic YTD relative to 2023.