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Buy DuPont as Dow combination to create high-growth chemical giant, Nomura says

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Nomura initiated coverage of DuPont with a buy rating on Wednesday, citing strong earnings potential from the proposed combination with Dow Chemical.

"We expect the DuPont-Dow merger to generate above-trend growth in earnings and FCF [free cash flow] for the next three years — exceptional in a macro environment where growth is scarce," wrote equity analyst Aleksey Yefremov in a research note.

In December, DuPont and Dow Chemical announced a proposed all-stock merger of equals, which is expected to close before the end of the year.

"Even as a stand-alone company, DuPont is attractive investment opportunity, we believe," said Yefremov.

Here are the catalysts that could take the stock to new highs, according to the investment research firm: