What Management Said
Read the full Q2 2026 transcript ↗Earlier today, we reported our second quarter financial results, which again exceeded our previously communicated guidance. Through our ongoing focus on excellence and productivity, we delivered organic sales growth of 4%, 80 basis points of margin expansion, double-digit adjusted EPS growth, and robust free cash flow conversion in the quarter. As a result of our second quarter performance, we are again raising our full year 2026 financial guidance for organic sales growth, operating EBITDA and adjusted EPS. We expect our free cash flow conversion to be ahead of our 90% target.
Additionally, we announced that in the third quarter, we expect to launch a $250 million share repurchase, which highlights our continued focus on driving a disciplined capital allocation model. We continue to make strong progress advancing our strategic priorities through a more robust and disciplined business system with a clear focus on organic growth, accountability, execution, and continuous improvement across the company. The objective is straightforward: reinforce the operating culture required to deliver sustainable performance while building repeatable capabilities that drive growth, margin expansion, and shareholder value over time. Our pipeline continues to deliver new wins across high growth and emerging applications through differentiated products and application development.
You can see that in the quality and relevance of launches coming through the pipeline. Here we are moving from process deployment to operating discipline, and the early demand generation momentum is encouraging. Overall, we are building a more systemic commercial engine, clear targeting stronger data quality, accelerated demand generation, and more disciplined execution from opportunity creation through conversion, leading to a strong pipeline. It's a growth enabler that improves customer experience, strengthens margins, and enhances our competitive position over time.
What went well
- DuPont exceeded its second-quarter guidance and again raised full-year 2026 guidance, delivering 4% organic sales growth, 80 basis points of margin expansion, 21% adjusted EPS growth, and 127% free-cash-flow conversion.
- Net sales rose 4% to $1.8 billion on broad-based organic growth led by healthcare, aerospace, industrial water and semiconductor markets, with operating EBITDA up 8% to $448 million and adjusted EPS of $1.88 (GAAP EPS from continuing operations of $1.37).
- Transaction-adjusted free cash flow was $326 million (127% conversion), and management now expects full-year conversion closer to 100%, well ahead of its 90% target.
- DuPont announced a $250 million share repurchase to launch in the third quarter while retaining well over $1 billion of capacity for M&A across water and healthcare (including CDMO and packaging).
- The company completed its June 2026 reverse stock split and, effective July, had its GICS classification changed to Industrials, recognizing its multi-year transformation, and its business system (innovation, commercial excellence, OpEx, 80/20) is delivering measurable gains including ~200 bps of net productivity and a ~35% innovation vitality index.
- Diversified Industrials operating EBITDA grew 7% with margin up 70 basis points to 22.1%, aided by double-digit growth in aerospace and EV-battery applications.
What went wrong
- Water sales grew only low-single-digits as the Middle East conflict pushed desalination/reverse-osmosis project timing around, leading management to temper the full-year water outlook from mid-single-digit to low-to-mid-single-digit growth.
- Healthcare & Water Technologies operating EBITDA margin declined 30 basis points to 30.1% as organic growth and productivity were more than offset by less favorable mix (a reversal of Q1's heavier healthcare weighting) and growth investments.
- Price-cost dynamics were a 30-basis-point headwind to margin in the quarter from oil-and-gas inflation, expected to be a ~50-basis-point headwind in the second half.
- A strengthening U.S. dollar reduced the expected currency benefit, prompting DuPont to lower its full-year net sales guidance midpoint even as it raised organic growth, EBITDA and EPS.
Guidance Changes
| Metric | Period | Current guidance |
|---|---|---|
| Organic sales growth | FY2026 | Slightly ahead of 4% (dropping Q2 outperformance to the year) |
| Net sales | FY2026 | Midpoint $7.175B (adjusted down on lower expected currency benefit) |
| Operating EBITDA | FY2026 | Raised to $1.760B at the midpoint (24.5% margin, incl. ~30 bps oil/gas inflation headwind) |
| Adjusted EPS | FY2026 | $7.24 at the midpoint (+$0.15; +18% vs prior-year pro forma) |
| Net sales / Adjusted EPS | Q3 2026 | Net sales ~$1.835B, operating EBITDA $448M (24.4% margin), adjusted EPS $1.80-$1.90 |
| Free cash flow conversion | FY2026 | Ahead of 90% (closer to 100%) |
Performance Breakdown
| Metric | YoY | Note |
|---|---|---|
| Net sales | +4% to $1.8B | 4% organic growth (about a point of price) led by healthcare, aerospace, industrial water and semiconductor markets, with a 1% currency benefit. |
| Operating EBITDA | +8% to $448M | Organic growth and productivity drove 80 bps of margin expansion to 24.6%, including a 30 bps price-cost headwind. |
| Adjusted EPS | +21% to $1.88 | $0.17 from stronger operations plus a $0.15 benefit from below-the-line items (versus prior-year pro forma); GAAP continuing-operations EPS $1.37. |
| Healthcare & Water Technologies sales | +5% ($856M, +4% organic) | Mid-single-digit healthcare (double-digit personal protection and biopharma) and low-single-digit water (double-digit industrial water/semi offset by the Middle East). |
| Diversified Industrials sales | +3% organic ($963M) | Low-single-digit building technologies (resi/non-resi) and mid-single-digit industrial technologies (double-digit aerospace and EV battery). |
| Free cash flow | $326M (127% conversion) | Earnings growth and net-working-capital productivity across DSO, DPO and inventory days. |
| Net productivity | ~200 bps COGS reduction | Contributed ~100 bps of margin expansion; management targets a 3% net productivity run rate within ~18 months. |
Earnings Call Themes & Trends
| Topic | Previous mention | Current period | Trend |
|---|---|---|---|
| Post-separation industrial identity | Diversified materials conglomerate | Following the Qnity electronics separation, DuPont completed a reverse stock split and was reclassified to Industrials (GICS), aligning metrics with an industrial peer set. | — |
| Business system rollout | Launched innovation/commercial/OpEx/80-20 frameworks | Moving from deployment to operating discipline: ~35% innovation vitality index, AI-accelerated sales plays (150 opportunities won, ~30% win rate), ~200 bps net productivity, and 80/20 piloted in four Diversified Industrials businesses. | — |
| Middle East water disruption | Logistics constraints and delayed projects | Desalination/RO project timing is shifting (not cancelled) due to the conflict; Middle East is ~10% of water sales, with ex-Middle East water up mid-single-digits and the long-term mid-single-digit water outlook intact. | — |
| Secular growth exposures | Developing positions | Double-digit growth in aerospace and EV battery (adhesives, ~$70M and rising toward triple digits), 20%+ ultrapure-water growth for semiconductor/AI chipmakers, and a new ~$200M direct-lithium-extraction (DLE) opportunity requiring no incremental capital. | — |
| Capital allocation | Balanced approach post-separation | $250M buyback launching in Q3 plus over $1B retained for disciplined M&A (water and healthcare/CDMO) at mid-teens growth valuations moving to lower-teens net of synergies. | — |
| Compensation and culture change | Segment-level bonus, salaried sales force | 2026 short-term incentives moved to the line-of-business level for accountability; sales force moving to commission-based in 2027 to drive a 'hunter' growth mindset. | — |
Q&A Summary
Jeff Sprague (Vertical Research) asked for anchors on innovation contribution/product vitality and the starting point for cost of poor quality and OTIF.
Koch cited a ~35% innovation vitality index (shifting mix toward growth), reaffirmed the minimum 3%-4% organic growth target, and said cost of poor quality is ~4% of sales (below the ~5% benchmark) with more than 100 bps OTIF improvement in the quarter.
Scott Davis (Melius) asked where net productivity stands, the timeframe to best-in-class, and whether compensation plans have been changed.
Koch said the net productivity target is 3% of COGS (achievable within ~18 months, ~200 bps this quarter), and that 2026 bonuses moved to the line-of-business level while the sales force shifts to commission-based in 2027.
Joe Ritchie (Goldman Sachs) asked for a Middle East update and to unpack the Healthcare & Water margin contraction.
Koch said the Q1-to-Q2 shift occurred and large Middle East/global water projects remain on the books (mostly hitting Q4), driving ~5% organic growth in Q3 and 7% in Q4; Franzen attributed the 30 bps margin decline to the reversal of Q1's healthcare mix plus growth investments, with strong underlying margins.
John McNulty (BMO) asked what drives the second-half Diversified acceleration and how to think about 80/20's top-line impact.
Franzen said the H2 step-up is essentially ~2 points of incremental oil-and-gas pricing on top of Q2's 4%, with ~40% incrementals; Koch said 80/20's 2026 benefit is mostly margin (a few million dollars), with no material top-line headwind and a potential longer-term top-line benefit.
Chigusa Katoku (JPMorgan) asked about the water phasing and whether second-half margins decelerate beyond oil inflation.
Koch tempered full-year water to low-to-mid-single-digit (Middle East driven) with high-single-digit H2 growth, while raising healthcare to keep the segment profile intact; Franzen said segment margins ex price-cost actually rise ~50 bps in the second half on productivity and growth leverage.
Harris Fein (Wolfe) asked about the M&A pipeline and CDMO opportunities, and how sticky second-half pricing is.
Koch said DuPont has a robust water and healthcare (packaging and CDMO) pipeline with over $1B of capacity, targeting mid-teens valuations (lower-teens net of synergies) and growth-accretive assets; pricing (~1 point full year, ~2 points in H2) will be reassessed for 2027.
Josh Spector (UBS) asked whether the small organic-growth raise implies better volumes, and to size the EV battery business.
Franzen credited healthcare and Diversified Industrials (strong industrial order book, low-double-digit gains, resi outperformance) offsetting Middle East water; Koch sized EV battery (primarily adhesives) at ~$70M today, heading to triple digits, within a ~$900M automotive portfolio where EV is nearing 50%.
Vincent Andrews (Morgan Stanley) asked about second-half cash flow and whether AI is driving the higher commercial win rate.
Franzen guided full-year conversion closer to 100% on working-capital focus, and Koch clarified the ~30% garment-business win rate (versus a typical high-teens) is driven by the enhanced commercial organization, with AI mainly compressing sales-play launch time from months to ~four weeks.
More on DuPont de Nemours, Inc.
Reported 2026-08-04 · figures from the DuPont de Nemours, Inc. Q2 2026 earnings call.
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