FMC Corporation FMC is expected to gain from robust demand for its herbicides and insecticides, new product offerings and continued investments to expand the product portfolio and boost market position amid headwinds from cost and volume pressure.
FMC Corp’s shares have gained 13.7% over the past year, underperforming the industry’s rise of 45.1%.
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Let’s delve deeper to find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.
What’s Aiding FMC?
The company is seeing healthy demand for its products in a couple of regions. There is robust demand in North America backed by strong crop commodity prices. Strong demand was also witnessed in soybean and sugarcane applications in Brazil throughout 2020 and the same is expected to continue in 2021. In Australia, the demand for herbicides remains strong. It also experienced higher demand for diamides and other insecticides in specialty crops in Asia, in 2020. It also expects growth in the global crop protection market this year, on an improvement in crop commodity prices and reducing effects of the pandemic on crop demand.
Moreover, the company remains committed to expanding its market position and investing in its research and development (R&D) pipeline to offer new technologies to its customers and enhance value creation for the farmers. New product launches in Europe, North America and Asia are contributing to volume growth. It expects new products to contribute $400 million (including $100 million from products launched in 2021) in sales this year.
Additionally, it remains focused on returning value to shareholders. It returned around $343 million to shareholders through dividends and share repurchases in 2020 and expects to generate significant free cash flow (of $530-$620 million) in 2021. It expects to buy back stock worth $400-$500 million and payout dividends of nearly $250 million in 2021. The company returned $137 million to shareholders in the most recent quarter through dividend and share repurchases.
Cost headwinds are a concern for the company. It is facing challenges like higher supply-chain costs, partly due to supply disruptions from production issues in countries like China and India amid the coronavirus outbreak. It is seeing rising costs for some raw materials and active ingredients due to supply constraints. The company expects cost headwinds of $40-$50 million associated with raw material and logistics cost increases in 2021. It is also exposed to cost headwinds stemming from higher R&D investments in 2021.
It also faced volume pressure in the last reported quarter. Volumes declined 4% in the quarter, hurt by a decline in cotton acreage in Brazil and discontinued registrations in the EMEA. Prevailing softness in the cotton business in Brazil is expected to be a headwind for the company through the first half of 2021. A significant increase in coronavirus cases in India and Brazil may also negatively impact agricultural markets across these countries over the near term and hurt demand for its products.
FMC Corporation Price and Consensus
FMC Corporation price-consensus-chart | FMC Corporation Quote
Stocks to Consider
Some better-ranked stocks in the basic materials space are Olin Corporation OLN, Univar Solutions Inc. UNVR and Tronox Holdings PLC TROX, each sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Olin has a projected earnings growth rate of 506.7% for the current year. The company’s shares have soared 273.6% in a year.
Univar has a projected earnings growth rate of 35.2% for the current year. The company’s shares have risen 50.3% in a year.
Tronox has a projected earnings growth rate of 242.9% for the current year. The company’s shares have jumped 174.9% in a year.
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