FMC Corp. Snips View as Cold Winter Hits Agriculture Biz - Analyst Blog

Chemical company FMC Corp. FMC saw it shares slide after it cut its earnings forecasts for second-quarter and full-year 2014 citing weakness in its core agriculture business, which is hurt by frigid winter.

FMC Corp. now sees adjusted earnings for 2014 in the band of $4.10 to $4.30 per share. Earlier, it expected earnings in the range of $4.35 to $4.55 per share for the year.

For the second quarter, FMC Corp. lowered its adjusted earnings forecast to a range of 95 cents to $1.05 per share from $1.05 to $1.15 expected earlier.

The PA-based company's shares sagged around 4.9% to close at $71.10, placing it among the big movers on the NYSE yesterday.

Bad weather conditions in North America sustained into the second quarter, reducing application of the company's pre-emergent products and dragging down sales of products such as insecticides. FMC Corp., while providing its previous guidance, expected extreme weather conditions to subside and sales to recover in the remaining quarters of 2014.

FMC Corp. also noted that drought conditions in Brazil prompted sugarcane farmers to cut their use of crop protection products. Moreover, farmers significantly reduced their replanting rates, which led to lower use of herbicides and insecticides in the sugarcane segment. Management does not expect these conditions to improve through the balance of 2014.

Given these factors, FMC Corp. foresees second-quarter earnings from its Agricultural Solutions division to rise in mid single-digits clip year over year. For 2014, revenues and operating earnings for the segment are expected to be up by mid single-digits percentage.

For the Health and Nutrition segment, FMC Corp. continues to expect earnings to increase in low-teens clip in the second quarter on increased volumes. For the full year, earnings are still expected to increase in mid-teens percent over 2013, led by healthy demand for functional ingredients and contributions from omega-3 products.

FMC Corp. has also backed its forecasts for the Minerals segment. Second-quarter earnings for the division are expected to rise by low-teens percent on operating improvements across soda ash and lithium businesses. Earnings for the full year have been projected to increase in high-teens clip on improved performance in lithium operations and higher soda ash pricing.

FMC Corp., in Mar 2014, announced its plans to split itself into two independent public companies. The move will allow the company to separate its growth businesses - Agricultural Solutions and Health and Nutrition – from the Minerals division which is a more cyclical business. The company has started initial preparations for the separation and remains on track to close the separation in first-half 2015, following which, each company is expected to be listed on the NYSE.

FMC Corp., a Zacks Rank #3 (Hold) stock, will release its second-quarter results after the close on Jul 30.

Other companies in the chemical space worth considering include Compass Minerals International Inc. CMP, Celanese Corporation CE and Koninklijke DSM N.V. (RDSMY). While Compass Minerals retains a Zacks Rank #1 (Strong Buy), both Celanese and Koninklijke DSM sport a Zacks Rank #2 (Buy).