FMC Corp May See Volume Contraction, Analyst Warns Of Flattish Underlying Demand, Downgrades Stock

BofA Securities analyst Steve Byrne downgraded FMC Corporation FMC from Neutral to Underperform, lowering the price target to $57 from $60.

The analyst estimates the company’s volume contraction in 2023 at 20%, more than offsetting the prior 2-year volume gain of 18%.

The volume contraction assumes global inventory levels of crop chemicals approaching normal levels, which suggests flattish underlying demand.

Per Byrne, the lack of visibility about monitoring and managing channel inventory levels will need to be improved. 

The analyst also highlighted concerns that the relatively undisciplined global crop chemical industry (vs. seed producers) could lead to aggressive price actions in 2024 in response to cautious inventory rebuilds.

At their recent investor event, FMC highlighted their product pipeline, which includes eight synthetic products, four biologicals, and six pheromone-based products. 

According to the analyst, the biologicals (biocontrol products for insects and diseases) have the potential for streamlined regulatory pathways and could be used in combination with synthetic and pheromone products (inhibit insect mating, resulting in lower egg densities). 

These products have “meaningful potential” as resistance development among insect, fungal, and weed pests can be rapid.

However, the analyst underscored that assessing the present value of this pipeline is challenging but could drive a recovery in the company’s valuation multiple.

The analyst lowered the 2024 EPS estimate to $4.20 from $4.30, slashing the revenue estimate for the year to $4.605 billion from $4.641 billion.

Byrne decreased the 2025 EPS estimate to $5.15 from $5.30, reducing the revenue estimate for the year to $4.835 billion from $4.873 billion.

Price Target:  FMC shares closed lower by 2.01% to $57.04 on Tuesday. 

Photo via Company