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Balanced View on FMC Corp.

Zacks Equity Research

On Mar 13, we issued an updated research report on chemical company FMC Corporation (FMC). While the company is seeing healthy momentum in its agricultural business, it is exposed to currency headwinds and softness in its minerals business.

FMC Corp. posted better-than-expected fourth-quarter 2013 results on Feb 5 with both revenues and adjusted earnings beating Zacks Consensus Estimates. Profit (as reported), however, slid roughly 74% year over year on charges related to the sale of the company’s Peroxygens business. Revenues rose around 24% on gains across the board.

FMC Corp., a Zacks Rank #3 (Hold) stock, is well placed to meet or exceed its targets for “Vision 2015, a road map for future. Recent acquisitions and development agreements are adding strength to its agricultural business. The company expects a 15% year over year rise in earnings per share in 2014 (based on the midpoint of its guidance range) and anticipates business fundamentals to improve this year.

FMC Corp. sees above-market rate growth to continue for its agricultural business in 2014, driven by favorable market conditions, continued market share gains and new product introductions. Moreover, the Omega-3 product line and expanding portfolio are expected to drive earnings in the company's health and nutrition franchise.

FMC Corp. is also optimistic about its lithium business as demand is expected to remain strong on the back of greater adoption in electric vehicles and other applications.

However, FMC Corp. is exposed to significant currency headwind. Unfavorable swings in exchange rates affected its results last year. Unhedged currency movements reduced its earnings by roughly $13 million (or 9 cents per share) in 2013, mostly related to Brazilian real. While the company has taken up effective pricing strategy to offset the impact, its results remain susceptible to currency translation effects.

Moreover, FMC Corp.’s Minerals unit, a more cyclical business, remains somewhat weak with continued double-digit decline in profits. A soft soda ash export pricing environment and high costs are hurting the segment’s profitability. This has triggered the company’s recent decision to separate the unit. While soda ash export pricing is improving of late, the company currently has limited visibility on that front.

Key Picks from the Sector

Other companies in the chemical industry with favorable Zacks Rank are The Dow Chemical Co. (DOW), LyondellBasell Industries NV (LYB) and PPG Industries Inc. (PPG), all with a Zacks Rank #2 (Buy).

Read the Full Research Report on FMC
Read the Full Research Report on PPG
Read the Full Research Report on DOW
Read the Full Research Report on LYB


Zacks Investment Research