FMC Corp. (FMC - Free Report) will release its second-quarter 2017 results after the bell on Aug 1.
The chemical maker’s adjusted earnings of 43 cents per share for first-quarter 2017 missed the Zacks Consensus Estimate of 56 cents (a 23.21% negative surprise). Revenues fell roughly 2% year over year to $596 million in the quarter, and missed the Zacks Consensus Estimate of $743 million.
The company beat the Zacks Consensus Estimate in two of the trailing four quarters while missed in the other two, delivering an average negative surprise of 1.46%.
FMC Corp.’s shares have rallied 60.2% over the past year, outperforming the 21.8% gain of the industry it belongs to.
Let’s see how things are shaping up for this announcement.
Factors to Consider
FMC Corp., in May, cut its adjusted earnings outlook for 2017 to reflect the impact of the disposal of its Health & Nutrition unit which has been moved to discontinued operations. FMC Corp. now sees adjusted earnings in the band of $2.20 to $2.60 per share for the year, down from $3.20 to $3.60 per share it expected earlier.
FMC Corp. is still exposed to challenging agriculture market fundamentals. Agricultural market conditions remain challenging in North America due to elevated channel inventory levels and depressed farm income due to weak commodity prices. The company is also seeing sluggishness in Europe and expects the European agricultural market to be flat to modestly down in 2017.
The global crop protection market continues to face several woes, which has resulted in a difficult operating environment. Demand for crop protection products remains weak owing to high channel inventories, reduced pest attacks and soft farm commodity prices.
FMC Corp. is also exposed to currency headwinds. The company saw unfavorable currency impact in its European agriculture business in the first quarter contributing to a double-digit decline in sales. It sees sales this business to be modestly down in first-half 2017 due to currency headwinds.
Nevertheless, FMC Corp. is seeing strong demand in its Lithium unit. The company, last year, said that it will triple its lithium hydroxide production capacity by adding 20,000 metric tons per year. It will execute this expansion in three phases over the next few years. The move is based on the growing demand for electric vehicles. The company expects its lithium business to deliver strong earnings growth in 2017.
The planned acquisition of a major portion of DuPont's (DD - Free Report) Crop Protection business has also provided a significant growth platform for FMC’s Agricultural Solutions unit. Under the terms of the agreement, FMC Corp. will buy DuPont's Cereal Broadleaf Herbicides and Chewing Insecticides portfolios as well as some of the latter’s Crop Protection research and development pipeline and organization. As part of the deal, DuPont will also purchase FMC's Health & Nutrition business that raked in more than $700 million in revenues in 2016.
Our proven model does not conclusively show that FMC Corp. is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1 (Strong Buy), 2 (Buy) or 3 (Hold) for this to happen. This is not the case here as you will see below:
Zacks ESP: The Earnings ESP for FMC Corp. is 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate stand at 47 cents. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.
Zacks Rank: FMC Corp. currently carries a Zacks Rank #5 (Strong Sell). We caution against Sell-rated (Zacks Rank #4 or 5) stocks going into the earnings announcement, especially when the company is seeing negative estimate revisions momentum.
Stocks That Warrant a Look
Here are some other companies in the basic materials space you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
Westlake Chemical Corporation (WLK - Free Report) has an Earnings ESP of +5.04% and a Zacks Rank #2. You can see the complete list of today’s Zacks #1 Rank stocks here.
The Chemours Company (CC - Free Report) has an Earnings ESP of +4.44% and a Zacks Rank #2.
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