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DuPont (DD) Q2 FY26 earnings call: guidance and Q&A

Earnings call· Jun 2026 (Q2 FY26)· Aug 4, 2026

Source: earnings call transcript

Executive summary

DuPont Q2 FY26 — Strong Performance Drives Raised Full-Year Guidance and Share Repurchase

DuPont delivered strong Q2 FY26 results, surpassing guidance with broad-based organic sales growth and significant margin expansion, driven by its new disciplined business system. The company raised its full-year financial outlook and announced a share repurchase, reflecting confidence in its strategic priorities and operational improvements. Management highlighted the positive impact of its GICS code reclassification to Industrials, better aligning with its transformed portfolio and long-term value creation opportunities.

Highlights

5

  • Organic sales growth of 4% in Q2 FY26, exceeding previously communicated guidance.

  • Operating EBITDA margin expanded by 80 basis points to 24.6% in Q2 FY26.

  • Adjusted EPS grew 21% to $1.88 in Q2 FY26, driven by stronger operations and below-the-line items.

  • Robust free cash flow conversion of 127% in Q2 FY26, leading to an expectation of full-year conversion ahead of 90% target.

  • Announced a $250 million share repurchase to be launched in Q3 FY26, highlighting disciplined capital allocation.

Concerns

5

  • Operating EBITDA margin in Healthcare & Water Technologies decreased 30 basis points to 30.1% in Q2 FY26 due to less favorable mix and growth investments.

  • Water sales organic growth was low single-digits percent in Q2 FY26, partially offset by weakness in the Middle East.

  • Full-year 2026 net sales guidance adjusted to $7.175 billion due to a lower expected currency benefit from a strengthening U.S. dollar.

  • Full-year 2026 operating EBITDA margin includes a 30 basis point headwind from oil and gas inflation.

  • Third quarter 2026 net sales guidance assumes about 3% organic growth year-over-year as reported, with currency expected to be about a 1% headwind.

Guidance & targets

CategoryTargetConfidence
Full-year 2026 Organic Sales Growth
slightly ahead of 4%
high materiality
High
Full-year 2026 Net Sales
$7.175 billion
high materiality
High
Full-year 2026 Operating EBITDA
$1.760 billion
high materiality
High
Full-year 2026 Adjusted EPS
$7.24
high materiality
High
Full-year 2026 Free Cash Flow Conversion
ahead of our 90% target
medium materiality
High
Second Half 2026 Net Sales
$3.675 billion
medium materiality
High
Second Half 2026 Organic Growth
about 6% year-over-year
medium materiality
High
Second Half 2026 Operating EBITDA
$900 million
medium materiality
High
Third Quarter 2026 Net Sales
$1.835 billion
medium materiality
High
Third Quarter 2026 Organic Sales Growth (adjusted for prior year timing shift)
about 5% year-over-year
medium materiality
High
Third Quarter 2026 Organic Sales Growth (as reported)
about 3% year-over-year
medium materiality
High
Third Quarter 2026 Operating EBITDA
$448 million
medium materiality
High
Third Quarter 2026 Adjusted EPS
$1.80 to $1.90 per share
high materiality
High
Third Quarter 2026 Healthcare & Water Segment Organic Sales Growth
mid-single digits percent range
medium materiality
High
Third Quarter 2026 Diversified Industrials Segment Organic Sales Growth
low single-digit percent range
medium materiality
High
Full-year 2026 Water Business Organic Growth
low to mid-single-digit range
medium materiality
Medium
Second Half 2026 Water Business Organic Growth
high single-digit growth
medium materiality
Medium
Full-year 2026 Healthcare Expectations Organic Growth
tempered up
medium materiality
Medium

Segment performance

SegmentRevenueYoYQoQMargin
Healthcare & Water Technologies
Net sales up 5% (4% organic, 1% currency benefit). Operating EBITDA up 4% to $258 million. Operating EBITDA margin decreased 30 basis points year-over-year due to less favorable mix and growth investments, despite organic growth and productivity gains.
Healthcare sales organic growth: mid-single digits percentWater sales organic growth: low single-digits percentIndustrial water and semiconductor markets growth: double-digit gainsMiddle East Water sales organic growth (ex-Middle East): mid-single digits percent
$856 million5%—30.1%
Diversified Industrials
Net sales increased 3% (3% organic). Operating EBITDA up 7% to $213 million. Operating EBITDA margin increased 70 basis points year-over-year due to organic growth, favorable mix, and productivity.
Building Technologies organic sales growth: low single-digits percentIndustrial Technologies organic sales growth: mid-single digits percentAerospace and electric vehicle battery applications growth: double-digit gainsPrinting applications growth: mid-single-digit
$963 million3%—22.1%

Product announcements

ProductTypeDetails
Integrated end-to-end solution for direct lithium extractionlaunch
Olivia portfolioexpansion
New solutions for electric vehicles and battery energy storage systemslaunch

Risks & headwinds

Middle East conflict impact on Water business Q2 FY26, continuing into H2 FY26 (projects hitting Q4)

low single-digits percent organic growth for Water business in Q2 FY26; $10 million sales shift from Q1 to Q2 FY26

Mitigation:Water business performing well outside Middle East; projects still on books, expected to materialize in Q4.

Currency headwind from strengthening U.S. dollar Full-year 2026, Q3 FY26

lower expected currency benefit for full-year 2026 net sales (adjusted midpoint to $7.175 billion); 1% headwind in Q3 FY26

Mitigation:Stronger Q2 results and increased operating EBITDA guidance more than offset currency headwinds.

Oil and gas inflation Full-year 2026, H2 FY26, Q3 FY26

30 basis point headwind to full-year 2026 operating EBITDA margins; 50 basis point headwind to H2 FY26 and Q3 FY26 operating EBITDA margins

Mitigation:Pricing actions ($90 million for full year) are in place to maintain price/cost neutrality on a dollar basis.

Residential construction market softness Current

market would be down

Mitigation:DuPont is outperforming in the residential space, particularly in multifamily, seeing growth where the market is generally down.

What to watch in Q3 FY26

Middle East Water Project Realization

Q4 FY26
Current Projects still on books, expected to hit Q4 FY26
Target Materialization of projects in Q4 FY26, driving 7% organic growth

Why it matters

Verifying the timing and realization of these projects is crucial for the Water business's growth trajectory and overall company performance.

So we still got visibility to those. They're still on our books. We have continued to expect that most of that revenue hits in the fourth quarter versus the third quarter. So if you look at kind of the trajectory of organic growth that Antonella called out 3Q, 4Q and you take out the timing shift with respect to last year, we'll see about 5% organic growth in Q3 and then 7% in Q4.

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Q&A highlights

Seeking quantifiable anchors for the impact of innovation, commercial, and operational excellence initiatives, specifically product vitality, cost of poor quality, and OTIF.

Lori Koch highlighted a 35% vitality index for innovation, aiming to shift mix towards growth. Cost of poor quality is at 4% of sales (below 5% benchmark) and improving. OTIF improved by over 100 basis points. The 80/20 work is yielding a few million in EBITDA benefit in H2 FY26 from margin improvements.

“On the cost of poor quality to your question about the improvement that we're seeing, we're below benchmark. I think benchmarks were at around 5% of sales. We're at about 4% of sales with respect to cost of poor quality, and we look to drive that lower as we implement the OpEx [indiscernible] mark.”

asked by Jeffrey Sprague · answered by Lori Koch

3 min read 8 chapters

Detailed narrative

Strategic Priorities and Business System Impact

DuPont is driving sustainable performance through a robust business system focused on organic growth, accountability, execution, and continuous improvement. This system integrates innovation, commercial excellence, operational excellence, and 80/20 principles to prioritize high-value opportunities and scale successful initiatives, leading to improved productivity, quality, and customer delivery. The company's GICS code reclassification to 'Industrial' in July 2026 better reflects its transformed portfolio and long-term value creation opportunities.

Q2 FY26 Financial Outperformance

The company exceeded its Q2 guidance, achieving 4% organic sales growth, 80 basis points of operating EBITDA margin expansion, 21% adjusted EPS growth, and 127% free cash flow conversion. This strong performance led to an upward revision of full-year 2026 financial guidance for organic sales, operating EBITDA, and adjusted EPS, with free cash flow conversion expected to surpass 90%. Net sales reached $1.8 billion, and operating EBITDA was $448 million.

Capital Allocation and Share Repurchase

DuPont announced a $250 million share repurchase program to be launched in Q3 FY26, demonstrating a disciplined capital allocation strategy. This approach balances shareholder returns with capacity for M&A, with over $1 billion still available for potential acquisitions. The company seeks mid-teen valuation targets for M&A, aiming for lower teens post-synergies and incremental growth to its overall algorithm.

Innovation and Commercial Excellence Initiatives

Innovation remains central, with a vitality index of approximately 35% and a focus on accelerating development cycles and improving the front-end pipeline. Commercial excellence is being scaled using AI-driven sales plays, which have generated 150 opportunities with a 30% win rate, significantly above historical percentages and industry benchmarks, particularly in the garment business, contributing $5 million to $6 million in incremental sales.

Operational Excellence and 80/20 Program

Operational excellence is yielding measurable improvements in productivity, quality, and on-time in-full (OTIF) delivery, with OTIF improving by over 100 basis points and cost of poor quality at 4% of sales (below 5% benchmark). The 80/20 initiative, piloted in four Diversified Industrials businesses, has identified meaningful opportunities for margin improvement and resource reallocation, with initial EBITDA benefits expected in H2 FY26.

Segment Performance Highlights

Healthcare & Water Technologies saw 4% organic growth, with strong gains in personal protection, biopharma, and industrial water, though overall segment margin declined 30 basis points due to less favorable mix and growth investments. Diversified Industrials achieved 3% organic growth, driven by aerospace, EV battery applications, and outperformance in residential construction, with strong order books supporting H2 acceleration.

EV Battery Market Opportunity

The EV battery space, primarily driven by adhesives, currently generates around $70 million in revenue and is expected to grow into the triple digits in 2026 and 2027. This segment is a significant contributor to DuPont's automotive portfolio, making up almost 50% of the $900 million total, with strong growth seen in European markets as new OEM models are introduced.

Middle East Water Business Dynamics

The Water business experienced weakness in the Middle East due to regional conflict, impacting project timing and logistics, leading to a slight tempering of full-year Water expectations to low to mid-single digits. However, performance outside the Middle East remains robust, with mid-single-digit organic growth in Q2, and projects are expected to materialize in Q4 FY26.

Summary of the company's earnings call; see how call summaries are prepared. Not investment advice.