Will FMC Corp. (FMC) Disappoint This Earnings Season? - Analyst Blog

FMC Corp. (FMC) will release its third-quarter 2014 results after the bell on Oct 29.

Last quarter, the chemical maker delivered a 0.98% negative surprise as higher charges weighed on its bottom line. After being hit by harsh winter weather in the first quarter, the company's core Agricultural Solutions division delivered a healthy performance in the second quarter, contributing to the top line growth.

Let's see how things are shaping up for this announcement.

Factors to Watch For

FMC Corp., in Jul 2014, provided an adjusted earnings target of between 90 cents and $1.00 per share for the third quarter, a 16% year over year improvement at the mid-point of the band.

Earnings in FMC Corp.'s Agricultural Solutions segment are expected to up by low to mid-teens clip year over year in the third quarter, aided by the company's focus on high-margin products. The results are also expected to be driven by strength in Latin America, new products and market access investments.

For Health and Nutrition, earnings are forecast to rise in the mid to high single-digit clip year over year in the September quarter. The growth is expected to be backed by higher demand in health markets and Omega-3 product line.

FMC Corp. expects earnings in the Minerals segment to increase 30% year over year in the third quarter on the back of higher soda ash pricing and increased volumes in Lithium and Alkali Chemicals businesses.   

However, FMC Corp. is exposed to significant currency headwinds. Unfavorable currency movements reduced its earnings by 5 cents per share in the second quarter and by 10 cents in first-half 2014. While the company has taken up effective pricing strategy to offset the impact, its results remain susceptible to currency translation effects.

Moreover, high spending related to the separation of the Minerals division may weigh on the company's bottom-line in the September quarter as did in the last reported quarter.
 
Earnings Whispers
 
Our proven model does not conclusively show that FMC Corp. is likely to beat earnings in the third quarter. That is because a stock needs to have both a positive Earnings ESP (Expected Surprise Prediction) and a Zacks Rank #1, 2 or 3 for this to happen. That is not the case here, as you will see below.
 
Negative Zacks ESP: The earnings ESP for FMC Corp. is -4.17% – the difference between the Most Accurate estimate of 92 cents and the Zacks Consensus Estimate of 96 cents.
 
Zacks Rank #4 (Sell): FMC Corp. has a Zacks Rank #4. We caution against stocks with Zacks Rank #4 and 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
 
Other Stocks to Consider

Here are some other chemical stocks you may want to consider as our model shows they have the right combination of elements to post an earnings beat this quarter:
 
Methanex Corp. (MEOH) has earnings ESP of +9.23% and retains a Zacks Rank #3 (Hold).

Westlake Chemical Corp. (WLK) has earnings ESP of +2.58% and sports a Zacks Rank #3 (Hold).

Ashland Inc. (ASH) has earnings ESP of +2.21% and holds a Zacks Rank #3 (Hold).