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Here's Why FMC Corporation Rose 12.2% in February, Then Collapsed in Early March

By Maxx Chatsko – Updated Apr 12, 2019 at 5:09PM

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The agricultural sciences leader reported full-year 2018 operating results, then abruptly sank in early March.

What happened

Shares of FMC Corporation (FMC 1.01%) gained over 12% last month, according to data provided by S&P Global Market Intelligence. The stock rose after the company reported solid fourth-quarter and full-year 2018 operating results driven by the agricultural solutions segment, which benefited from a massive acquisition in 2017 that became fully integrated last year. While year-over-year growth in the year ahead will look relatively pedestrian by comparison, the larger overall business will create more opportunities for long-term investors.

Of course, the agricultural solutions segment is now the only source of business under the company's helm after all remaining shares of Livent Corporation, formerly FMC Lithium, were distributed to shareholders in a spin-off on the first day of March. That spin-off is also the (harmless) reason behind the sudden collapse in the price of FMC Corporation stock earlier this month.

Check out the latest earnings call transcript for FMC Corporation.

A plant growing out of a jar of coins.

Image source: Getty Images.

So what

FMC Corporation reported that the agricultural solutions segment delivered revenue of $4.28 billion and EBITDA of $1.22 billion last year, which represented healthy growth from 2017. Management issued full-year 2019 guidance that calls for year-over-year revenue growth of 5%, adjusted EBITDA growth of 7%, and adjusted earnings per share (EPS) growth of 8%. It also has an ambitious plan to return capital to shareholders (primarily in the form of a massive share repurchase program) and invest in R&D (although it could do more).

All in all, there's relatively little for shareholders to gripe about. So, what about that awful start to March?

Well, FMC Corporation distributed to its shareholders 123 million shares of common stock of Livent Corporation on March 1. That represents about 84% of the lithium producer's outstanding shares, or roughly $1.6 billion worth of stock. Since the parent didn't benefit financially from the spin-off, FMC Corporation saw its market cap -- and therefore share price -- fall by roughly $1.6 billion. Of course, existing shareholders received that back in the form of Livent common stock, so the net change to individual portfolios was zero.

Now what

With the spin-off finally complete, FMC Corporation can turn its full attention to its robust agricultural solutions portfolio. It still has growth opportunities available just by increasing its market share in select global breadbaskets, in addition to new product launches expected in the next few years. That said, the growth likely will be slower, which means shareholders might come to value the business for its stability and quickly growing dividend instead.

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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