DuPont Divides to Enhance Water Business

Following the announcement of DuPont's breakup, the company's water unit, which specializes in filtration and purification products, has seen a surge in investor interest. Jim Cramer, a prominent financial commentator, suggested that the water business could be sold for a significantly higher price than its current valuation within the diversified company. This speculation comes on the heels of a stronger-than-expected earnings report, highlighting the potential value of the water segment. DuPont's decision to separate its water business aligns with the growing demand for specialized investment opportunities, particularly as its electronics division benefits from the rising need for AI chips. The World Bank has also warned that water-related economic challenges could hinder growth in various regions, further emphasizing the importance of the water sector. RBC analyst Viswanathan noted that DuPont's research-and-development spending is approximately 6% of sales, outpacing competitors and enabling the continuous development of premium products. Despite being the smallest of the three entities formed by the breakup, DuPont's water unit boasts an impressive EBITDA margin of 18.9% for 2023, with projections indicating a rise to 20.3% in 2024. Comparatively, industry peers like Ecolab, Pentair, and Veralto reported EBITDA margins of 19.9%, 22.3%, and 24.1%, respectively, underscoring the competitive edge of DuPont's water business. Analysts believe that DuPont's management may be receptive to offers for the water unit, given its size relative to the other businesses. As interest in the water sector grows, the company is expected to carefully evaluate any potential opportunities.