FMC Corp (FMC) Gains on Strong Demand Amid Cost Headwinds
FMC Corporation FMC is benefiting from higher demand, pricing actions and new product launches amid headwinds from higher raw material costs and unfavorable currency swings.
The company’s shares are up 13% in the past year compared with a 4.2% decline of the industry.
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FMC Corp, a Zacks Rank #3 (Hold) stock, is gaining from higher demand for its products, its portfolio strength and contributions of new products. The company is seeing healthy demand for its industry leading products, driven by strong global agricultural market fundamentals. The strong demand environment coupled with the company’s price increase actions is driving its top line. The company is actively taking price increase measures to mitigate the impact of cost inflation.
The company is well placed to capitalize on the underlying strength in global crop protection markets thanks to high commodity prices. It is seeing demand strength for diamides and insecticides in North America on higher crop commodity prices. Demand for Rynaxypyr brands continues to grow in the region. Strong demand is also being witnessed in corn, sugarcane and soybean applications in Brazil, aided by higher planted areas and high commodity prices. Demand for herbicides also remains strong in Australia. FMC Corp is also seeing strength in its insecticide portfolio in Asia.
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. New products launched in Europe, North America and Asia are gaining significant traction and are contributing to volume growth. Product introductions are expected to support the company’s results this year.
The acquisition of BioPhero ApS, a Denmark-based pheromone research and production company, also adds biologically produced state-of-the-art pheromone insect control technology to the company’s product portfolio and R&D pipeline, highlighting FMC's role as a leader in delivering innovative and sustainable crop protection solutions.
FMC also remains committed to return value to shareholders leveraging healthy cash flows. It expects to generate free cash flow of $565-$685 million in 2022. The company paid $134 million in dividends in first-half 2022. FMC, in its second-quarter call, said that it expects to return up to $334 million to shareholders through dividends and share repurchases through the balance of 2022.
However, FMC Corp is exposed to headwinds from higher raw materials costs due to supply disruptions. The supply bottlenecks, exacerbated by the Russia-Ukraine conflict, have resulted in rising costs of some raw materials and active ingredients. Along with higher packaging costs, raw material and logistics costs are likely to remain elevated through 2022. Pandemic-related shutdowns in China and elevated energy costs in Europe are the other concerns. Higher raw materials and logistics costs might impact the company’s performance.
The company also faces currency headwinds. It is particularly challenged by headwinds associated with the weakening of European currencies. FMC sees currency headwinds for full-year 2022 as the U.S. dollar strengthens against major currencies in Europe and Asia. This is expected to drag its performance in 2022.
FMC Corporation Price and Consensus
FMC Corporation price-consensus-chart | FMC Corporation Quote
Stocks to Consider
Better-ranked stocks worth considering in the basic materials space include Albemarle Corporation ALB, Univar Solutions Inc. UNVR and The Chemours Company CC.
Albemarle, sporting a Zacks Rank #1 (Strong Buy), has a projected earnings growth rate of 425.3% for the current year. The Zacks Consensus Estimate for ALB's current-year earnings has been revised 63.7% upward in the past 60 days. You can see the complete list of today’s Zacks #1 Rank stocks here.
Albemarle’s earnings beat the Zacks Consensus Estimate in each of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 24.2%, on average. ALB has gained around 29% in a year.
Univar, currently carrying a Zacks Rank #2 (Buy), has an expected earnings growth rate of 24.2% for the current year. The consensus estimate for UNVR's earnings for the current year has been revised 5.9% upward in the past 60 days.
Univar’s earnings beat the Zacks Consensus Estimate in three of the trailing four quarters, the average being 27.6%. UNVR has gained around 4% over a year.
Chemours has a projected earnings growth rate of 40% for the current year. The Zacks Consensus Estimate for CC's current-year earnings has been revised 6.9% upward in the past 60 days.
Chemours’ earnings beat the Zacks Consensus Estimate in three of the last four quarters. It has a trailing four-quarter earnings surprise of roughly 28.3%, on average. CC has gained around 13% in a year and currently carries a Zacks Rank #2.
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