FMC Corp. (FMC) Upgraded To Buy On Upbeat Prospects
Zacks Investment Research | Apr 11, 2017 10:01PM ET
On Apr 11, Zacks Investment Research upgraded chemical maker, FMC Corp. (NYSE:FMC) to a Zacks Rank #2 (Buy) from a Zacks Rank #3 (Hold). Going by the Zacks model, companies holding a Zacks Rank #2 have chances of performing better than the broader market in the quarters ahead.
Why the Upgrade?
FMC Corp.’s stock looks promising at the moment. The company has significantly outperformed the Zacks categorized Chemicals-Diversified industry over a year, aided by its expansion actions and strong demand across specialty end markets. Its shares gained 98.3% over this period compared with the industry’s gain of 17.9% over the same period.
FMC Corp. sees healthy growth in its adjusted earnings in 2017. It expects adjusted earnings in the band of $3.20 to $3.60 per share for 2017, a year over year increase of 20% at the mid-point of the guidance range.
FMC Corp. is gaining from strategic investments, synergies of Cheminova A/S acquisition and new product launches. The company remains committed to expand its market position and strengthen its portfolio. FMC Corp. is investing in technologies in its agriculture business and launching new products with a goal to enhance value to the farmers. It plans to launch around 40 new products in 2017.
Acquisitions and development agreements are also adding strength to the company’s agricultural business. The buyout of Cheminova A/S has reinforced FMC Corp.'s agriculture business and expanded its access in major agricultural end markets. The company is making a good progress with the integration of the acquired operations of Cheminova. FMC Corp. expects to deliver Cheminova-related full run rate cost savings of $140 million to $160 million by mid-2017.
The proposed acquisition of a major portion of DuPont's (NYSE:DD) Crop Protection business has also provided a significant growth platform for the company'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. These assets generated revenues of around $1.4 billion last year.
The deal is expected to complete in the fourth quarter of 2017. After deal closure, FMC Corp.’s Agricultural Solutions unit will become the fifth biggest crop protection chemical company in the world by sales with estimated annual revenues of around $3.8 billion. The acquisition will significantly increase the company’s presence in Asia and Europe and will be immediately accretive to its adjusted earnings per share.
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In its lithium business, FMC Corp. is seeing strong demand across specialty end markets. A significant long-term driver for the lithium business is the expected rapid adoption of lithium-ion batteries in electric vehicles. The company, in May 2016, 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.
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