On Nov 14, 2014, Zacks Investment Research downgraded chemical company FMC Corp. (FMC) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
FMC released its third-quarter 2014 results on Oct 29. The company’s adjusted earnings from continuing operations for the quarter came in 95 cents per share, missing the Zacks Consensus Estimate by a penny.
Even though the company’s revenues were up 6% year over year to $1,015.9 million in the reported quarter on higher sales across all segments, it missed the Zacks Consensus Estimate of $1,058 million.
During the third quarter, the company’s portfolio was impacted by the market dynamics. Agricultural markets were affected by a host of factors around the world while sluggish demand for the company’s products in certain beverage applications in China impacted parts of its health and nutrition business. Weak demand in China is expected to persist in the fourth quarter.
FMC Corp.’s Minerals division was also affected by the unfavorable impact of operating in Argentina in the third quarter. Weak conditions in Argentina are expected to continue to affect FMC’s cost structure and profitability for this business in the fourth quarter.
For FMC, the Zacks Consensus Estimate for the fourth quarter has fallen over the last 30 days by 20% to a penny per share. Estimates have also fallen for 2014 and 2015 by 6% and 10.1%, respectively, over the same period. The current Zacks Consensus Estimate for 2014 and 2015 stand at $3.91 and $4.37 per share, respectively.
FMC Corp., in Mar 2014, announced its plans to split itself into two independent public companies through the separation of its growth businesses – Agricultural Solutions and Health and Nutrition – from the cyclical Minerals division. However, the company modified this separation plan in Sep 2014 and said that it is selling its Alkali Chemicals unit, while retaining the lithium business. The divestment is expected to complete in the first half of 2015.
Other Stocks to Consider
Other chemical stocks worth considering include Innospec Inc. (IOSP), Kronos Worldwide Inc. (KRO) and Celanese Corporation (CE). While Innospec and Kronos carry a Zacks Rank #1 (Strong Buy), Celanese holds a Zacks Rank #2 (Buy).
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