U.S. Markets closed

Moody's Assigns Baa1 to FMC's Senior Notes

Zacks Equity Research

FMC Corporation’s (FMC) $400 million senior notes due 2024 were assigned Baa1 rating by Moody's Investors Service. Moody’s granted the rating to FMC based on its strong business profile and performance.

According to Moody’s, FMC occupies a substantial market position in both agricultural and biopolymers, which protects the company from some cyclicality that is usually present in the global chemicals industry. High petrochemical feedstock and energy costs are not a concern for FMC.

The Agricultural Solutions segment of FMC delivers strong performance and its soda ash business demonstrates healthy supply and demand fundamentals. The company also maintains stable and modestly improved operating margins.

However, the rating also takes into account agricultural market risks including the seasonality of sales, the significant influence of weather, and the effect of crop prices and government subsidies on farmers' use of FMC's pesticide products. The ratings also consider continued spending for environmental remediation, an underfunded pension balance and material operating leases.

Moody's could consider an upgrade to the rating if FMC maintains retained cash flow to debt above 35% and debt to EBITDA below 2x, and continues to carry forward its Vision 2015 strategy, thereby increasing profits and sales.

FMC Corp. released its third-quarter 2013 results in Oct 2013. The company’s consolidated adjusted earnings were 82 cents per share, missing the Zacks Consensus Estimate by a penny but exceeding the year-ago adjusted earnings of 77 cents.

Adjusted earnings exclude charges (including those related to restructuring and acquisitions) of $92.3 million. Consolidated profit, as reported, slid 80% year over year to $17.9 million (or 13 cents per share) from $90 million (or 65 cents a share), hurt by sizable charges.

Revenues rose roughly 16% year over year to $957.4 million in the reported quarter on strength in the company’s core agricultural solutions business. It was, however, trailed the Zacks Consensus Estimate of $966 million.

FMC Corp. is a leading diversified chemical company that serves agricultural, industrial, environmental and consumer markets across the globe. It is a leading maker of Lithium-based materials for primary and rechargeable batteries used in laptops, cellular phones and electric cars.

FMC Corp. currently retains a short-term Zacks Rank #3 (Hold).

Other companies in the chemical industry worth considering include Methanex Corp. (MEOH), Asahi Kasei Corp. (AHKSY) and BASF (BASFY). While Methanex and Asahi Kasei hold a Zacks Rank #1 (Strong Buy), BASF carries a Zacks Rank #2 (Buy).

Read the Full Research Report on FMC
Read the Full Research Report on BASFY
Read the Full Research Report on MEOH
Read the Full Research Report on AHKSY

Zacks Investment Research