FMC Corp. Picks Up Sell-Side Bull On Strong Growth Forecast

FMC Corp FMC acquired a portion of DowDuPont Inc DWDP's crop protection business and sold its health and nutrition business to DowDuPont in November. The chemical manufacturer reported first-quarter results May 2 that included EPS and sales beats. 

The Analyst

Goldman Sachs analyst Robert Koort upgraded shares of FMC from Neutral to Buy and increased the price target from $99 to $114.

The Thesis

FMC's pro forma agricultural organic growth remains strong, and the contribution from the DowDuPont buy is exceeding expectations, Koort said in a Monday note.

The analyst expects fiscal 2018 EPS to exceed the top end of the company's guidance. FMC's segment guidance downplays sales growth and synergy potential from the acquisition, Koort said. 

Goldman Sachs forecast double-digit EPS growth in 2019 and 2020, with $100 million of SAP/TSA savings and robust earnings growth trajectories.

Corn prices — historically a leading indicator of crop protection sales growth —are approaching two-year highs, and corn inventories are near the lowest levels since 2013, Koort said. 

Despite the 22-percent rally off the March bottom, the analyst said it isn't too late to own FMC stock, as it it has yet to fully emerge from a bearish turn in lithium sentiment. 

"We think FMC is an underappreciated growth story with cyclical upside potential in ag, deeply discounted value in lithium, and balance sheet optionality as it deleverages to less than 2x TTM EBITDA in 2018 per our model." 

The Price Action

FMC shares were up 1.14 percent at $89.88 at the time of publication Monday. 

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