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Bear of the Day: Sociedad Quimica y Minera de Chile (SQM)
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Sociedad Quimica y Minera de Chile (SQM - Free Report) produces and distributes specialty plant nutrients and fertilizers, lithium derivatives, and industrial chemicals. The company provides potassium chloride and sulfate for crops such as corn, rice, wheat, and sugar. It also provides iodine for use in medical, industrial, and pharmaceutical applications.
In addition, SQM offers lithium carbonates for various applications such as materials for batteries, air-conditioning chemicals, and heat-resistant glass. Sociedad Quimica y Minera de Chile was incorporated in 1968 and is headquartered in Santiago, Chile.
The Zacks Rundown
SQM stock is a Zacks Rank #5 (Strong Sell) and is a component of the Zacks Fertilizers industry group, which ranks in the bottom 30% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the course of the year:
Image Source: Zacks Investment Research
Candidates in the bottom tiers of industries can often be potential short candidates. While individual stocks have the ability to outperform even when included in a poorly-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Adding to the underperformance this year, stocks in this group are experiencing negative earnings growth:
Image Source: Zacks Investment Research
As a part of this group, SQM stock has experienced considerable volatility in 2023; shares recently touched a 52-week low.
Recent Earnings Misses and Deteriorating Outlook
SQM has fallen short of earnings estimates in each of the last two quarters. The company most recently reported second-quarter earnings back in August of $2.03/share, missing the $2.62/share consensus EPS estimate by 22.5%. Earnings plunged 32.6% from the same quarter in the prior year.
The fertilizer company has missed earnings estimates by an average of 4.74% over the past four quarters. Consistently falling short of earnings estimates is a recipe for underperformance, and SQM is no exception.
Sociedad Quimica y Minera de Chile has been on the receiving end of negative earnings estimate revisions as of late. For the third quarter, analysts have decreased estimates by 12.82% in the past 60 days. The Q3 Zacks Consensus EPS Estimate now stands at $2.38/share, translating to negative growth of -38.2% relative to last year.
Image Source: Zacks Investment Research
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, SQM stock is in a sustained downtrend. Notice how shares have plunged below both the 50-day and 200-day moving averages signaled by the blue and red lines, respectively. The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.
Image Source: StockCharts
While not the most accurate indicator, SQM stock has also experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average crosses below its 200-day moving average. SQM would have to make a stern move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. Shares have fallen more than 45% in the past year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to hit new highs anytime soon. The fact that SQM is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
SQM shares continue to experience substantial volatility and have widely underperformed this year. With negative earnings estimate revisions continuing to pile up, this stock should be avoided as there are plenty of better alternatives in the current market environment.
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Bear of the Day: Sociedad Quimica y Minera de Chile (SQM)
Sociedad Quimica y Minera de Chile (SQM - Free Report) produces and distributes specialty plant nutrients and fertilizers, lithium derivatives, and industrial chemicals. The company provides potassium chloride and sulfate for crops such as corn, rice, wheat, and sugar. It also provides iodine for use in medical, industrial, and pharmaceutical applications.
In addition, SQM offers lithium carbonates for various applications such as materials for batteries, air-conditioning chemicals, and heat-resistant glass. Sociedad Quimica y Minera de Chile was incorporated in 1968 and is headquartered in Santiago, Chile.
The Zacks Rundown
SQM stock is a Zacks Rank #5 (Strong Sell) and is a component of the Zacks Fertilizers industry group, which ranks in the bottom 30% out of more than 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the course of the year:
Image Source: Zacks Investment Research
Candidates in the bottom tiers of industries can often be potential short candidates. While individual stocks have the ability to outperform even when included in a poorly-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.
Adding to the underperformance this year, stocks in this group are experiencing negative earnings growth:
Image Source: Zacks Investment Research
As a part of this group, SQM stock has experienced considerable volatility in 2023; shares recently touched a 52-week low.
Recent Earnings Misses and Deteriorating Outlook
SQM has fallen short of earnings estimates in each of the last two quarters. The company most recently reported second-quarter earnings back in August of $2.03/share, missing the $2.62/share consensus EPS estimate by 22.5%. Earnings plunged 32.6% from the same quarter in the prior year.
The fertilizer company has missed earnings estimates by an average of 4.74% over the past four quarters. Consistently falling short of earnings estimates is a recipe for underperformance, and SQM is no exception.
Sociedad Quimica y Minera de Chile has been on the receiving end of negative earnings estimate revisions as of late. For the third quarter, analysts have decreased estimates by 12.82% in the past 60 days. The Q3 Zacks Consensus EPS Estimate now stands at $2.38/share, translating to negative growth of -38.2% relative to last year.
Image Source: Zacks Investment Research
Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.
Technical Outlook
As illustrated below, SQM stock is in a sustained downtrend. Notice how shares have plunged below both the 50-day and 200-day moving averages signaled by the blue and red lines, respectively. The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.
Image Source: StockCharts
While not the most accurate indicator, SQM stock has also experienced what is known as a ‘death cross’, wherein the stock’s 50-day moving average crosses below its 200-day moving average. SQM would have to make a stern move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. Shares have fallen more than 45% in the past year alone.
Final Thoughts
A deteriorating fundamental and technical backdrop show that this stock is not set to hit new highs anytime soon. The fact that SQM is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns. A history of earnings misses will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.
SQM shares continue to experience substantial volatility and have widely underperformed this year. With negative earnings estimate revisions continuing to pile up, this stock should be avoided as there are plenty of better alternatives in the current market environment.