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FMC Up 10% Since Earnings Report: Can It Continue?

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It has been about a month since the last earnings report for FMC Corporation (FMC - Free Report) . Shares have added about 10% in that time frame.

Will the recent positive trend continue leading up to its next earnings release, or is FMC due for a pullback? Before we dive into how investors and analysts have reacted as of late, let's take a quick look at its most recent earnings report in order to get a better handle on the important catalysts.

FMC Tops Q1 Earnings & Sales Estimates, Ups View

FMC reported net profit of $267.2 million or $1.96 per share in first-quarter 2018 against a net loss of $124 million or 92 cents per share recorded a year ago.

Barring one-time charges and gains, adjusted earnings came in at $1.84 per share in the quarter, exceeding the Zacks Consensus Estimate of $1.63.

The company’s revenues jumped more than two-fold year over year to $1,210.7 million. The figure also surpassed the Zacks Consensus Estimate of $1,146.1 million.

According to the company, the Ag Solutions business, which reported its first full quarter since the acquisition of DuPont crop protection, demonstrated its ability to generate very strong demand for the acquired products and the success of its integration globally. Moreover, the company’s expansion of lithium hydroxide in China and price increases of roughly 30% on hydroxide nearly doubled Lithium segment’s profitability year over year.

Segment Review

Revenues from the Agricultural Solutions division jumped a whopping 108.9% year over year to $1,107.9 million in the first quarter, driven by the DuPont asset buyout. Segment earnings were $356 million, up 250% year over year.

Revenues from the Lithium unit surged 57% year over year to $103 million. Segment earnings nearly doubled to $50 million. Higher year-over-year prices on all product categories, higher volume from debottlenecking projects in Argentina, lower operating costs and hydroxide expansion in China were the major contributors to growth.

Balance Sheet

FMC ended the first quarter with cash and cash equivalents of $359.7 million, a 27.1% year-over-year rise.

Long-term debt was almost flat year over year at $2,993.2 million.

Outlook

For 2018, FMC increased adjusted earnings expectations to the band of $5.90 to $6.20 per share (up from $5.20 to $5.60 expected earlier).

For second-quarter 2018, the company expects adjusted earnings in the range of $1.65 to $1.75 per share. The company stated that the plan to separate listing of its Lithium unit in October this year also remains on track.

For the Agricultural Solutions unit, FMC increased revenue expectations for 2018 in the range of $4.05 billion to $4.25 billion (revised up from $3.95 billion to $4.15 billion).  

FMC now expects revenues in the range of $430 million to $460 million (up from prior guidance of $420 million to $460 million) for the Lithium unit for 2018.

How Have Estimates Been Moving Since Then?

In the past month, investors have witnessed an upward trend in fresh estimates. There have been six revisions higher for the current quarter.

VGM Scores

At this time, FMC has a poor Growth Score of F, however its Momentum is doing a lot better with a C. The stock was also allocated a grade of C on the value side, putting it in the middle 20% for this investment strategy.

Overall, the stock has an aggregate VGM Score of F. If you aren't focused on one strategy, this score is the one you should be interested in.

Zacks style scores indicate that the company's stock is suitable for value and momentum investors.

Outlook

Estimates have been trending upward for the stock and the magnitude of these revisions looks promising. It comes with little surprise FMC has a Zacks Rank #1 (Strong Buy). We expect an above average return from the stock in the next few months.


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