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Bear of the Day: FMC (FMC)

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FMC (FMC - Free Report)  is a global agricultural sciences company that provides solutions to enhance crop health and productivity. With a focus on innovation and sustainability, FMC develops and markets a wide range of crop protection products, including herbicides, insecticides, and fungicides. Additionally, the company offers agricultural solutions such as seed treatments and precision agriculture technologies to support farmers worldwide.

FMC stock has struggled in recent years, with its stock trading unchanged since 2019. Furthermore, its near-term prospects are not ideal, as analysts have lowered earnings estimates, and price action sets up another move lower.

Based on this setup, investors should look for opportunities elsewhere.

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Earnings Revisions Plummet

Current quarter earnings estimates have been slammed lower by -50% in the last two months and are expected to come in -72% lower than the same quarter last year.

Analysts have unanimously lowered earnings estimates across timeframes, and the earnings revision trend has been moving precipitously lower since July of 2023. This gives FMC a Zacks Rank #5 (Strong Sell) rating.

The industry broadly seems to be dealing with falling herbicide and fertilizer costs weighing on profits and pushing the sector near the bottom of the Zacks Industry Rank. FMC currently sits in the bottom 16% (212 out of 251) of the Zacks Industry Rank and bottom 6% (15 out of 16) of the Zacks Sector Rank.  

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Technical Setup

Although at the beginning of month it appeared that FMC may have found a bottom, as the stock pushed 20% higher in just two weeks, this is quickly reversing. The price action has quickly retreated from a significant level of resistance and is now breaking down from a small bear flag.

I would not be surprised to see FMC share price re-test the lower bound of the range, and possibly break below over the next few weeks or months.

Image Source: TradingView

Bottom Line

While I have little doubt that FMC will at some point be a stock worth owning in the future, there are too many industry specific headwinds currently weighing on profits. Fertilizer prices in particular are still correcting from the exuberant prices following the 2022 bout of inflation, and until it resolves will remain an obstacle.

For context, fertilizer prices nearly quadrupled between 2021 and mid-2022, and since corrected -65% from the highs. Even in just the last month prices fell -24%.

Until prices settle, and analyst begin to upgrade earnings estimates, investors should avoid FMC.

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