FMC Corp Gains on Solid Demand & New Products Amid Cost Woes

We issued an updated research report on FMC Corporation FMC on May 18.

The company is gaining from strong demand for its herbicides and insecticides and its efforts to expand product portfolio amid headwinds from unfavorable currency translation and cost inflation.

The company’s shares are down 9% year to date compared with the 27.9% decline of its industry.

 

FMC is gaining from higher demand for its products, its portfolio strength and new product launches. The company is seeing strong demand for its industry leading products, which is driving its revenues.

In Latin America, FMC is witnessing healthy demand from cotton and sugarcane growers in Brazil as well as solid demand for insecticides in Argentina. Strong demand for herbicides and insecticides is also driving the company’s agriculture business in North America. The company is seeing strength in Rynaxypyr insect control product in that region. Demand for fungicides also remain strong in EMEA (Europe, Middle East, and Africa).

Moreover, FMC remains focused on boosting its market position and strengthening its product portfolio. It is investing in technologies and products as well as new launches to enhance value to the farmers. Product introductions are expected to support its results in this year.

New products contributed roughly 1.5% to overall top line growth in the first quarter of 2020. The company anticipates new products to contribute 1.5% of revenue growth in 2020 with the biggest contribution expected from EMEA. New product launches in Europe, North America and Asia are also expected to contribute to strong volume growth in the second quarter.

FMC also remains committed to return value to shareholders leveraging healthy cash flows. The company, in late 2019, hiked its quarterly dividend by 10% to 44 cents per share. The company expects to generate free cash flow of $425-$525 million in 2020 and maintain its dividend payout.

However, FMC faces significant headwind from unfavorable currency translation. Currency had an unfavorable impact of 4% on its sales and $45 million on adjusted EBITDA in the first quarter. The company now sees currency headwind on EBITDA of $170 million for full-year 2020, higher than its previous guidance of $45 million. The impact on revenues is forecast to be 5% in 2020. Currency impact on EBITDA for the second quarter is projected to be $45 million.

The company is also exposed to challenges from higher costs, partly due to coronavirus-led disruptions. It saw an unfavorable impact of $7 million from cost inflation on adjusted EBITDA in the first quarter. The company sees $26 million of cost headwind in 2020, partly reflecting coronavirus-induced impacts on supply chain costs.

FMC Corporation Price and Consensus

 

FMC Corporation Price and Consensus

FMC Corporation price-consensus-chart | FMC Corporation Quote

 

Zacks Rank & Stocks to Consider

FMC currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks worth considering in the basic materials space are Barrick Gold Corporation GOLD, The Scotts Miracle-Gro Company SMG and Newmont Corporation NEM.

Barrick Gold has a projected earnings growth rate of 64.7% for the current year. The company’s shares have rallied roughly 123% in a year. It currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Scotts Miracle-Gro has an expected earnings growth rate of 17.7% for the current fiscal year. The company’s shares have gained roughly 65% in the past year. It currently carries a Zacks Rank #2.

Newmont has a projected earnings growth rate of 85.6% for the current year. The company’s shares have surged around 113% in a year. It currently has a Zacks Rank #2.

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