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Here's Why FMC Dropped 21.9% in 2018

By Maxx Chatsko - Updated Apr 17, 2019 at 9:12PM

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The company's two segments, agricultural solutions and lithium, turned in a strong performance, but concerns over the health of those two industries weighed on shares.

What happened

Shares of FMC (FMC 1.93%) fell nearly 22% last year, according to data from S&P Global Market Intelligence. Despite a disappointing stock performance, the business absolutely crushed it in 2018. The agricultural-solutions segment was bolstered by the integration of substantial assets acquired from DuPont in 2017, while the lithium segment continued its torrid pace of growth.

That wasn't enough to keep investors from worrying over the future of the lithium market, which proved to be an overreaction, and continued sluggishness in global agricultural markets, which hasn't seemed to hurt the company's insecticide-heavy business -- yet. Mr. Market might be beginning to realize that shares are a little undervalued. As of Jan. 11, the stock had settled to an 8.6% gain since the beginning of 2019.

A stick figure trying to use a pulley to reverse a falling arrow chart.

Image source: Getty Images.

So what

In a little over one month, FMC will spin off its roughly 85% interest in the lithium business, which is now a separate publicly traded company called Livent. That will complete an impressive portfolio overhaul that began roughly two years ago and will allow the company to focus 100% of its bandwidth on its agricultural solutions segment, which is among the largest in the world.

Management doesn't want to waste any time returning value to shareholders once the business slims down. FMC plans to pay out $1.3 billion in dividends, gobble up $3.2 billion in shares, and invest $1.8 billion in R&D activities in its current five-year plan.

Now what

Ambitious plans to create value for shareholders and invest in new technology, along with the stock's track record of beating the S&P 500 over long periods, makes FMC one of the top agricultural stocks to buy in 2019. Investors will want to keep an eye out for full-year 2018 operating results set to be released in the next month or so. Management should provide a clear update regarding the spin-off of Livent Corporation shares and what it expects from its agricultural-only business for the remainder of the year.

Check out the latest FMC earnings call transcript.

Maxx Chatsko has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.

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