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DuPont reported better than expected first quarter results Wednesday morning. Even better, management signaled that the chemical company is moving past most of the destocking headwinds that plagued it this year. Net sales declined roughly 3% year over year to $2.9 billion, beating expectations of $2.8 billion, according to LSEG. On an organic basis, sales were down 6% versus the year-ago period. Adjusted earnings per share (EPS) of 79 cents was down 6% year over year but was a big beat against the LSEG estimate of 65 cents. It also came in well above management’s guidance of 63 cents to 65 cents. DuPont Why we own it : We added this specialty chemical maker as an industrial way to play the recovery in the semiconductor and electronics industries, which have strong multiyear outlooks due to advancements in AI. Although the company has been dealing with excess inventory in a few business lines, it should soon turn the corner. We also appreciate the company’s strong balance sheet and management’s commitment to share repurchases. Competitors : 3M , PPG Industries Most recent trade : Feb. 14, 2024 Initiated : Aug. 7, 2023 Bottom line Based on the reaction to DuPont’s results — shares of DuPont rose 7% to a new multiyear high — investors believe this is just the first great quarter of many to come. We agree. Over the past few years, DuPont has taken aggressive steps to reshape and realign its portfolio around global macro themes that boost demand for its specialty products and services. The part of the business that attracted us to the story last year was its largest end market by sales — electronics (29%) — which we felt was on the precipice of a multiyear recovery after the downturn from 2022 to 2023. After a few quarters of bottoming, we’re finally seeing early signs of a market recovery. But the electronics story is more than just a few quarters story. On the conference call, CEO Ed Breen said the E & I business will grow in the high single digits in 2025 as fab utilization — shorthand for chip manufacturing — continues to improve. Increased spending on AI will accelerate that growth, since DuPont’s semiconductor-related products are levered to advanced node chips for data centers and other key AI applications, such as mobile products. As for the rest of the business, the destocking in the Water unit and some parts of the Industrial Technologies segment appear to have bottomed, and the company has since seen an increase in orders to back up its call for a return to growth. Elsewhere, the Protection business is back on track for low single-digit growth, and even DuPont’s Next-Gen Automotive business, which is levered to electric vehicles but also hybrid vehicles, is seeing stable demand. Given all these positive factors, DuPont should deliver on its guidance of sequential improvement throughout the year. And once the destock is over across every business line, we expect the stock to command a higher multiple. As a result, we are raising our price target to $85 from $78. We are maintaining our 2 rating with the stock trading at its high, but a pullback to the mid-$70s could be a good level to upgrade it to a 1. Quarterly results Organic sales in the Electronics & Industrial business declined 2% year over year, with volume and prices both down 1%. Still, the results were better than expected. Within the segment, Semiconductor Technologies sales rose 10% thanks to the start of the recovery in semiconductor demand, which is expected to increase throughout the year as semiconductor fab utilization rates continue to improve. Some of DuPont’s biggest customers are Taiwan Semi and Samsung, so as these manufacturers crank out chips, DuPont should see its volumes rise. Interconnect Solutions sales increased by mid-single digits, representing the second consecutive quarter of year-over-year volume growth as the broad electronic markets bounced back. The one problem child is still Industrial Solutions, where sales fell about 20% due destocking of its Kalrez O-rings and the products line within biopharma. On the bright side, DuPont expects orders to improve over the next several quarters in Kalrez while biopharma’s recovery is expected later in the second half of the year. At Water & Protection, organic sales fell 10% due to lower volumes. Within that segment, Safety Solutions sales fell in the low teens on volumes as the channel worked through inventory destocking, mostly for Tyvek medical packaging products. The good news is that management believes its customers’ inventory is nearing normalization. At Water Solutions, organic sales were down in the mid-teens on lower volumes due to distributor inventory destocking and weaker industrial demand. But as we’ve pointed out over the last few months, orders have been picking up which leads Breen to believe the destock is bottoming and will begin to recover in the second quarter. And in Shelter Solutions, the destock looks complete after sales were flat in the first quarter and expected to rise sequentially in the second quarter. Guidance Following the better-than-expected first quarter and the positive order trends across its businesses, DuPont raised its outlook for the full year. It now expects net sales to be in the range of $12.1 billion to $12.4 billion, above the Street’s expectations of $12.1 billion. This new outlook reflects a continued electronics recovery and some easing of channel inventory destocking in industrial-based businesses. The operating EBITDA outlook was raised to a range of $2.9 to $3.05 billion, which is above Street estimates of about $2.9 billion. In addition, management raised its adjusted EPS outlook by $0.20 at the low end and $0.10 at the high end to the range of $3.45 to $3.75. This is well above analysts’ estimates of $3.44. The outlook assumes a return to year-over-year sales and earnings growth in the second half of the year, driven by the ongoing electronics market recovery and return to volume growth in its water and protection business. (Jim Cramer’s Charitable Trust is long DD. See here for a full list of the stocks.) As a subscriber to the CNBC Investing Club with Jim Cramer, you will receive a trade alert before Jim makes a trade. Jim waits 45 minutes after sending a trade alert before buying or selling a stock in his charitable trust’s portfolio. If Jim has talked about a stock on CNBC TV, he waits 72 hours after issuing the trade alert before executing the trade. THE ABOVE INVESTING CLUB INFORMATION IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY , TOGETHER WITH OUR DISCLAIMER . 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DuPont reported better than expected first quarter results Wednesday morning. Even better, management signaled that the chemical company is moving past most of the destocking headwinds that plagued it this year.