Grade: F — Major Red Flags
Framework: Schilit *Financial Shenanigans* + Beneish M-Score + forensic accounting principles
Data: SEC EDGAR 10-K (Filed 2026-02-17, FY ended December 31, 2025) + Yahoo Finance
Auditor: PricewaterhouseCoopers LLP — Unqualified opinion
One-line verdict: DuPont reported a net loss of $779 million on $6.85 billion revenue in FY2025, driven by a massive restructuring in preparation for its planned separation into two companies. Three screening checks fail: FCF below 50% of net income for two years, cash covering only 22% of $3.2B debt, and goodwill plus intangibles at 78% of equity. The M-Score of -2.32 barely passes but sits in the grey zone, with the AQI (Asset Quality Index) component at 1.716 — far above the 1.0 baseline — signaling a shift in asset composition toward softer, less verifiable assets. The Z-Score of -0.56 places DuPont in the distress zone. This is a company in the middle of a fundamental restructuring, and its financial statements reflect the turbulence.
| Metric | Result |
|---|---|
| Red Flags | **3** (FCF/NI trend, cash-to-debt, goodwill/equity) |
| Watch Items | **2** (AR growth, CFFO/NI ratio) |
| Checks Completed | **17/18** (1 N/A: impairment data) |
| Beneish M-Score | **-2.32** (barely passes; threshold -2.22) |
| Z-Score | **-0.56** (distress zone) |
| Auditor | PricewaterhouseCoopers LLP |
A Company Splitting in Two
Per the filing, DuPont underwent a "Q4 2025 Segment Realignment" creating two new reportable segments: Healthcare & Water Technologies and Diversified Industrials. On November 1, 2025, DuPont completed the spin-off of its electronics business into a new public company called Qnity Electronics Inc. The filing also states the company agreed to sell its Aramids business.
| Segment | Description |
|---|---|
| Healthcare & Water Technologies | Medical packaging, medical devices, water filtration, protective garments |
| Diversified Industrials | Specialty materials, industrial applications |
Per the filing: "approximately 53 percent of net sales" came from international operations. Revenue was $6,849M for FY2025 — essentially flat against a pre-reorganization total of $6,719M in FY2024.
Profitability: Net Loss from Restructuring
| Metric | FY2023 | FY2024 | FY2025 | Trend |
|---|---|---|---|---|
| Revenue | $6,614M | $6,719M | $6,849M | +3.6% over 3 years |
| Net Income (loss) | $423M | $703M | -$779M | Volatile — restructuring year |
| Gross Margin | 32.8% | 33.0% | 34.5% | Improving |
| EPS (diluted) | $0.94 | $1.68 | -$1.87 | Distorted |
Per the filing: the net loss includes "Restructuring and asset related charges" plus stock-based compensation of $38M, a goodwill impairment charge of $668M (per the restructuring and asset charges line), and a $99 million loss on debt extinguishment. The operating business — as measured by gross margin expansion from 32.8% to 34.5% — is actually improving.
However, total debt decreased dramatically from $7,171M to $3,194M as DuPont "repaid 2025 Notes of $1,850 million" and completed "partial redemption of New Notes triggered by the Special Mandatory Redemption Event" related to the Qnity spin-off.
Cash Flow: Compressed by Restructuring
| Metric | FY2023 | FY2024 | FY2025 |
|---|---|---|---|
| Operating Cash Flow | $845M | $765M | $560M |
| Net Income (loss) | $423M | $703M | -$779M |
| CFFO / NI | 2.00 | 1.09 | -0.72 |
| CapEx | $2,063M | $605M | $388M |
| Free Cash Flow | -$1,218M | $160M | $172M |
Per the filing: cash flow from continuing operations was depressed by "net loss from continuing operations partially offset by improvements in net working capital." The current ratio improved dramatically from 1.17:1 to 1.87:1 as current liabilities fell with debt repayment.
FCF was marginally positive at $172M — a razor-thin margin on $6.8B revenue. Stock-based compensation was $38M (down from $56M), and a $668M goodwill impairment was the major non-cash charge.
The 18-Point Screening
Revenue Quality
| # | Check | Result | Detail |
|---|---|---|---|
| A1 | DSO Change | ✅ | DSO 48 days, +6 days YoY |
| A2 | AR vs Revenue Growth | ⚠️ | AR growth 15.3% exceeds revenue growth 1.9% |
| A3 | Revenue vs CFFO | ✅ | Revenue +1.9%, CFFO -26.8% |
A2 — AR growing much faster than revenue. Accounts receivable (trade) increased from $789M to $910M (+15.3%) while revenue grew only 1.9%. The filing also shows "Indemnified assets receivable" jumped from $20M to $216M — related to DuPont/Chemours PFAS indemnification obligations. Total accounts and notes receivable grew from $1,342M to $1,669M.
Expense Quality
| # | Check | Result | Detail |
|---|---|---|---|
| B1 | Inventory vs COGS | ✅ | Inventory +3.7% vs COGS -0.3% |
| B2 | CapEx vs Revenue | ✅ | CapEx growth -35.9% vs revenue +1.9% |
| B3 | SG&A Ratio | ✅ | SG&A/Gross Profit = 43.1% |
| B4 | Gross Margin | ✅ | 34.5%, +1.5pp improvement |
Cash Flow Quality
| # | Check | Result | Detail |
|---|---|---|---|
| C1 | CFFO vs Net Income | ⚠️ | CFFO/NI = -0.72 (net loss year) |
| C2 | Free Cash Flow | ❌ | FCF < 50% of Net Income for 2 years |
| C3 | Accruals Ratio | ✅ | -6.2%. Negative — clean |
| C4 | Cash vs Debt | ❌ | Cash $0.7B covers only 22% of debt $3.2B |
C2 — Persistently thin FCF. Free cash flow was only $172M in FY2025 and $160M in FY2024. On revenue of $6.8B, this is a <3% FCF yield. The heavy spending on capital projects (FY2023 CapEx was $2.1B, likely for the since-spun-off electronics business) compressed historical FCF.
C4 — Cash halved. Cash fell from $1,792M to $715M, with $600M held by foreign subsidiaries. Against $3.2B total debt, the coverage ratio is thin. However, the debt itself decreased by $4.0B year-over-year due to the Qnity spin-off.
Balance Sheet
| # | Check | Result | Detail |
|---|---|---|---|
| D1 | Goodwill + Intangibles | ❌ | $10.9B = 78% of equity |
| D2 | Leverage | ✅ | Debt/EBITDA = 2.8x |
| D3 | Soft Asset Growth | ✅ | Other assets -4.1% vs revenue +1.9% |
| D4 | Asset Impairment | — | No write-off data |
D1 — Legacy merger goodwill. Goodwill of $7,915M and other intangible assets of $2,936M total $10.9B, 78% of equity. The filing discloses the Donatelle acquisition added $814M in goodwill. Like Corteva, this goodwill burden is inherited from the DWDP merger and acquisition accounting.
Acquisition Risk
| # | Check | Result | Detail |
|---|---|---|---|
| E1 | Serial Acquirer FCF | ✅ | FCF after acquisitions positive |
| E2 | Goodwill Surge | ✅ | Goodwill change +1% YoY |
Manipulation Score
| # | Check | Result | Detail |
|---|---|---|---|
| F1 | Beneish M-Score | ✅ | -2.32 (barely passes) |
The M-Score is concerning despite passing. At -2.32 against a threshold of -2.22, DuPont passes by only 0.10 points. The most alarming component is AQI at 1.716 — meaning the proportion of soft assets (assets other than PP&E and current assets) increased significantly. This reflects the post-Qnity balance sheet reorganization where tangible electronics-related assets were spun off while goodwill and intangibles remain.
Key Risks from the 10-K
1. PFAS Litigation — A Legacy Liability with No Clear Ceiling
The filing references extensive PFOA/PFAS litigation shared with Chemours and Corteva. DuPont's "Indemnified assets receivable" jumped from $20M to $216M, indicating increasing cross-company claims. PFAS remediation and litigation costs are escalating nationally, and DuPont's exposure through its historical chemical operations creates ongoing contingent liability.
2. Qnity Spin-Off Execution and Remaining Separation
DuPont completed the Qnity Electronics spin-off in November 2025 and is pursuing the sale of its Aramids business. Each separation triggers restructuring charges, goodwill reallocation, and operating disruption. The filing records a "Transformational Separation-Related Restructuring Program" approved in March 2025.
3. Z-Score in Distress Zone
The Altman Z-Score of -0.56 places DuPont in the distress zone. This is driven by the net loss year, reduced working capital, and high intangible-to-total-assets ratio. While the Z-Score was designed for manufacturing companies and may overweight these factors for a specialty materials company, the signal should not be ignored.
4. International Revenue Concentration
53% of net sales come from international operations. The filing warns of "economic, geo-political, foreign exchange and other risks" associated with operations "in about 50 countries."
Summary
Grade: F. A company in the throes of corporate restructuring, with a net loss, razor-thin FCF, a barely-passing M-Score, and a Z-Score in distress territory.
DuPont's FY2025 financials are dominated by the Qnity spin-off, the Aramids sale process, and restructuring charges. The underlying gross margin improvement (32.8% to 34.5% over three years) suggests the remaining businesses are improving operationally. But three red flags (FCF trend, cash coverage, goodwill concentration) plus two watch items (AR growth, CFFO/NI), an M-Score that barely clears the threshold, and a Z-Score of -0.56 combine to paint a picture of financial stress. The $4.0B debt reduction is positive, but $10.9B in intangible assets on a post-separation balance sheet creates ongoing impairment risk. Wait for the post-separation financials to stabilize before reassessing.
**Disclaimer**: This report is based on DuPont de Nemours' FY2025 10-K filed with SEC EDGAR on February 17, 2026. This is NOT investment advice.
Data: SEC EDGAR 10-K + Yahoo Finance
Auditor: PricewaterhouseCoopers LLP (Unqualified opinion)
Fiscal year ended: December 31, 2025