Stocks largely managed to open higher on Monday, with most major market benchmarks pushing at least minimally into positive territory by midmorning. Concerns about potential macroeconomic pressures are vying against generally strong indications of continued growth in the minds of investors, and that has created a bit of doubt after a big move higher for markets in recent months.
There were a couple of stocks that gave their investors some bad news to start the week, however. FMC (FMC 1.14%) shares fell sharply after the agricultural sciences company released its latest financial report, while Outset Medical (OM 0.84%) had to announce that it had received troubling correspondence from a key regulator. Read on to learn more about both stocks and why their prices are down Monday morning.
FMC points to inventory pressures
Shares of FMC dropped 9% on Monday morning. The maker of various products for crop protection gave an update on how things went in the second quarter, and shareholders weren't pleased with what they heard.
FMC reduced its guidance for both the second quarter and the full 2023 year. The company now expects sales in the second quarter of between $1 billion and $1.03 billion. Full-year revenue is likely to be between $5.2 billion and $5.4 billion, with an adjusted pretax operating margin of 25% to 26%.
CEO Mark Douglas pointed to behavior from the partners through which it distributes its products. Even though end customers continued to use FMC's products, distributors rapidly reduced their inventory levels across three of the company's four major operating regions at the end of May. The company still intends to move forward with its cost-cutting initiatives in order to bolster its bottom line, but FMC didn't make any updates concerning earnings per share or free cash flow, pending more information on these inventory impacts.
The downgrade in guidance was significant, as investors had expected $1.45 billion in sales from FMC during the second quarter and more than $6.1 billion in revenue for 2023. At some point, distributors will have to build inventory back up, but until that happens, FMC could remain under some pressure from a growth perspective.
Outset gets a letter from the FDA
Elsewhere, shares of Outset Medical fell 11%. The move came as the dialysis equipment specialist had to deal with regulatory concerns.
Outset reported in a filing with the U.S. Securities and Exchange Commission late Friday that it had received a warning letter from the U.S. Food and Drug Administration (FDA). The letter made two observations, one concerning an assertion that the Outset website promotes a use of its Tablo hemodialysis machine outside current indications, and the other asserting the need for Outset to get a prior clearance for marketing its TabloCart accessory.
The letter follows previous observations from FDA inspections that Outset disclosed in its annual report back in February. Just as it conducted appropriate remedial action to address those issues shortly thereafter, Outset believes that actions it has already taken should take care of some of the FDA's concerns. Meanwhile, Outset expects to work closely with the FDA to address other issues.
The price of the medical device maker's stock had already fallen 30% since late January, as investors feared slower growth and weighed Outset's interactions with regulators. Despite promising performance from Tablo itself, Outset needs to get rid of any implications that it's not following regulatory requirements. Only then will it be likely that shareholders will get their confidence back in the company.
