Company Reports

On Feb. 29, FMC shares rallied in the late afternoon and finished the day up 10% following remarks from CFO Andrew Sandifer that FMC is beginning to see the end of customer inventory destocking and a return to normal demand. The commentary is in line with our view that crop chemical inventory destocking among farmers and farm retailers would prove temporary and largely be completed by early 2024. We forecast FMC will deliver revenue growth and a small adjusted EBITDA increase in 2024 versus 2023. With no changes to our outlook, we maintain our $110 fair value estimate. Our narrow moat rating is also unchanged.

After updating our model to incorporate FMC's fourth-quarter results, we maintain our $110 per share fair value estimate. Our narrow-moat rating is also unchanged. FMC's results were in line with our view that the inventory destocking that weighed on 2023 volumes will be complete by mid-2024. In our view, a drought in Brazil, FMC's largest market, weighed on fourth-quarter results and will prolong the period of inventory destocking among farmers and farm retailers in Brazil into 2024. However, we forecast revenue growth and a small adjusted EBITDA increase versus 2023.

FMC is a pure-play crop chemical producer. It is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's crop chemical portfolio, which included the blockbuster diamide insecticides. At the same time, it divested its nonagriculture businesses.

FMC shares have underperformed, falling 50% since the start of 2023. The decline was driven by a near-term slowdown from customer inventory destocking that prompted two guidance cuts. A current drought in Brazil, FMC's largest market, that will lead to lower crop production, leaves the market skeptical that FMC will realize revenue and profit growth in 2024 in line with guidance. Additionally, part of the stock selloff was driven by a short-seller report questioning FMC's long-term outlook. The report alleged FMC's diamides, its largest product category at 36% of 2022 revenue, would face generic competition in key markets two to three years before management guidance, threatening long-term profits.

FMC is a pure-play crop chemical producer. It is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's crop chemical portfolio, which included the blockbuster diamide insecticides. At the same time, it divested its nonagriculture businesses.

FMC is a pure-play crop chemical producer. It is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's crop chemical portfolio, which included the blockbuster diamide insecticides. At the same time, it divested its nonagriculture businesses.

Our key takeaway from FMC's investor day was the strength of the company's pipeline. Our long-term thesis on FMC has been that the company's strong pipeline will generate sales growth at a mid-single-digit rate, even when including the impact of the diamide patent expirations. These patent contributions made up 36% of FMC's revenue in 2022. We forecast FMC will generate growth from its pipeline of traditional crop chemicals and biologicals, with each product category contributing around half of the premium product revenue growth. As the company launches and ramps up new products, we see a clear path for adjusted EBITDA margins to recover to the mid-20% level, after falling to the low-20% level this year.

FMC is a pure-play crop chemical producer. It is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's crop chemical portfolio, which included the blockbuster diamide insecticides. At the same time, it divested its nonagriculture businesses.

FMC's detailed earnings results confirm our initial view that the company will likely see continued profit declines through the rest of 2023 and into 2024 due to an industrywide crop chemicals inventory reset. The company prereleased revised earnings expectations last week. With our outlook unchanged, we maintain our $110 per share fair value estimate and narrow moat rating for FMC.

FMC is a pure-play crop chemical producer. It is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's crop chemical portfolio, which included the blockbuster diamide insecticides. At the same time, it divested its nonagriculture businesses.

FMC reported high-level third-quarter results that were below the low end of guidance. Management also issued revised 2023 guidance with a lower outlook due to continued inventory destocking leading to lower sales volumes than the company had previously forecast. We have updated our model for a lower near-term outlook, and we reduce our FMC fair value estimate to $110 per share from $120. Our narrow moat rating is unchanged.

FMC is a pure-play crop chemical producer. It is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's crop chemical portfolio, which included the blockbuster diamide insecticides. At the same time, it divested its nonagriculture businesses.

On Sept. 7, a short seller released a report asserting that FMC's diamide products, which generated 36% of revenue in 2022, have begun to see competition from generic producers. FMC's first diamide molecule went off patent last year. This report is in contrast to FMC management's prior statements that the company should not see the first generic sales until 2026 at the earliest because the company has key process manufacturing patents that will protect the premium diamide sales after the molecule patents expired.

FMC is a pure-play crop chemical producer. It is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's crop chemical portfolio, which included the blockbuster diamide insecticides. At the same time, it divested its nonagriculture businesses.

FMC's detailed second-quarter results were largely in line with our revised outlook in July, following the company's high-level second-quarter update and management's guidance change. We view 2023 as a down year for the company, as farmers are likely to purchase fewer crop protection products as a way to reduce expense following a drop in crop prices. While we expect demand will return in 2024, we expect a more gradual recovery next year.

FMC is a pure-play crop chemicals producer. The company is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's divested crop chemicals portfolio, which included the blockbuster diamide insecticides. At the same time, the company divested nonagriculture businesses.

We trim our FMC fair value estimate to $135 per share from $140 after updating our model to incorporate the company's reduced 2023 guidance. Our narrow moat rating is unchanged.

FMC is a pure-play crop chemicals producer. The company is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's divested crop chemicals portfolio, which included blockbuster insecticide Rynaxypyr. At the same time, the company divested nonagriculture businesses.

We maintain our $140 per share fair value estimate for FMC after updating our model to reflect the company's first-quarter results. Our narrow moat rating is also unchanged.

FMC is a pure-play crop chemicals producer. The company is one of the five largest patented crop protection companies globally. FMC acquired Cheminova in 2015, increasing exposure to Europe and expanding its portfolio of crop chemicals. In late 2017, FMC acquired DuPont's divested crop chemicals portfolio, which included blockbuster insecticide Rynaxypyr. At the same time, the company divested nonagriculture businesses.