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DuPont calls activist Nelson Peltz’s attacks ‘misleading’

Clearly, there’s not a lot of natural chemistry between Nelson Peltz and DuPont.

On Thursday night, DuPont (DD) fired back after a string of attacks over the past few months by Peltz, the activist hedge fund manager who has accused the chemical company of being poorly managed. He says the board has stood by despite DuPont’s “continuing underperformance and repeated failures.”

In a public filing, DuPont responded by calling Peltz’s attacks on the company misleading and skewed. Going point by point, DuPont said Peltz’s calculations still don’t add up.

Earlier this week, Peltz’s Trian, which holds nearly 2.7% of DuPont’s shares, released a report saying that DuPont’s shares had underperformed similar companies including Dow Chemical (DOW), Honeywell (HON) and others. According to Trian, DuPont’s stock return has trailed its competitors by 16 percentage points – 94% versus 110% – since the middle of 2008 through early September 2014, shortly before Peltz hatched a public plan to break up the company.

But DuPont says Trian’s numbers are flawed. To calculate the aggregate return of Trian’s peers, Trian weighted the performance of the members of the group equally, and not by the size of each company. That’s what DuPont says is misleading. Most stock market indexes which track groups of stocks, including the S&P 500, are market weighted, meaning they give more weight to larger companies and less to smaller ones. Market weight the performance of the group, and DuPont’s stock has outperformed its competitors by 23 percentage points – 94% to 71%.

In addition, DuPont said Trian’s time period was arbitrary, and that the peer group, which includes some chemical companies, but also Honeywell (HOM) and General Electric (GE), it selected is different from the one DuPont has long used to compare itself to for determining executive compensation. Make those changes, and DuPont stock’s has beaten out competitors by 133 percentage points, or 266% versus 133% since the end of 2008.

In its latest attack Tuesday, though, Trian went after more than just DuPont’s stock price. Peltz’s hedge fund, which said last week it was launching a proxy battle to replace four of DuPont’s directors with four of its own recruits, including Peltz, said that DuPont’s earnings have also underperformed its peers.

Trian also pointed out that earnings at a company that DuPont sold a few years ago, Axalta, have gone up since it split with DuPont. But earnings at Danisco, a company that DuPont bought around the same time, have gone down. On top of that, Trian accused DuPont of continually falling short of analyst expectations. To be fair, though, Trian used estimates that DuPont’s analyst put out at the beginning of each year, which are often higher than the earnings companies’ actually end up reporting.

Still, DuPont said nothing to refute those points. And that so far has been the one main problem with DuPont’s defense, which has focused on its rising stock price. If DuPont really wants Peltz to go away, it may have to prove to its shareholders that CEO Ellen Kullman has real world performance, like a sizable earnings return on the billions DuPont has invested its businesses in the past few years, rather than just stock market performance.