FMC Corporation FMC is poised for growth on the back of strong demand for its herbicides and insecticides, strong commercial execution and its efforts to expand product portfolio and boost market position.
Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Favoring the Stock?
In July, FMC raised its adjusted earnings per share forecast to the range of $5.68- $5.88 from its earlier view of $5.62-$5.82. The revised guidance reflects an increase of 10% at the midpoint compared with recast 2018. For 2019, the company continues to expect revenues to be between $4.5 billion and $4.6 billion, indicating a rise of 6% at the midpoint versus recast 2018.
For third-quarter 2019, revenues are projected in the band of $960-$990 million, indicating 6% growth at the midpoint compared with recast third-quarter 2018. Adjusted earnings are forecast to be in the range of 75-85 cents per share, indicating 13% growth at the midpoint compared with recast third-quarter 2018 figure.
The company is witnessing strong demand for its industry leading products, which is driving its revenues. It is seeing higher demand for its premium product portfolio. In Latin America, the company is witnessing strong demand for cotton and sugarcane applications in Brazil. Continued growth of Rynaxypyr and Cyazypyr insect controls is contributing to strong sales growth in Latin America.
The company is also committed to expand its market position and strengthen portfolio. It is focused on 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. The company expects new products to account for around $60-$70 million in incremental sales growth in 2019.
FMC also remains committed to return value to shareholders leveraging healthy cash flows. The company expects to repurchase $400-$500 million of shares in 2019, including $200 million already purchased in the first half. It expects to generate free cash flow of $375-$475 million in 2019.
A Few Concerns
FMC is exposed to challenges from higher raw material costs. It witnessed an unfavorable impact of $46 million from raw material cost inflation on EBITDA in the second quarter. The company expects a $180 million headwind from higher raw material costs on its EBITDA for full-year 2019. It also sees $39 million in raw material cost headwind in the third quarter.
The company also faces headwind from unfavorable currency translation. Currency had an unfavorable impact of 4% on its sales in the second quarter. Unfavorable currency impact on EBITDA was $18 million in the quarter. FMC sees unfavorable currency impact on EBITDA of $39 million for full-year 2019.
Stocks Worth a Look
Better-ranked stocks worth considering in the basic materials space include Kinross Gold Corporation KGC, NewMarket Corporation NEU and Alamos Gold Inc. AGI, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Kinross has projected earnings growth rate of 155.7% for the current year. The company’s shares have surged around 71% in a year’s time.
NewMarket has an expected earnings growth rate of 16.2% for the current year. Its shares have gained around 12% in the past year.
Alamos Gold has estimated earnings growth rate of 320% for the current year. The company’s shares have rallied roughly 37% in a year’s time.
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