Shares of agricultural-chemicals specialist FMC Corporation (FMC 1.14%) collapsed in Monday trading, falling 12.5% through 1 p.m. ET, and it's no great secret why:
Early this morning, before the stock market opened for trading, FMC drastically reduced its guidance for its upcoming third-quarter earnings report -- and for the full year as well.
FMC sales and earnings forecast cut by half
The news here is pretty grim, so let's break it down line by line.
According to a poll of Wall Street analysts in TheFly, FMC was supposed to report about $1.02 per share in quarterly earnings on sales of $1.2 billion when earnings come out on Monday, Oct. 30. FMC itself had guided investors to expect anywhere from $0.90 per share to $1.32 in earnings, and sales of $1.2 billion to $1.3 billion. But "destocking" of chemicals inventories previously sold and now being worked down, combined with lower volumes sold in Latin America ("results in EMEA, Asia and North America were broadly in line with expectations") mean that FMC is going to miss both those marks.
Specifically, FMC says sales will be approximately $982 million in Q3 (about 19% below Wall Street estimates), while earnings will come in at just $0.44 per share -- less than half of both Wall Street and FMC's own prior predictions.
Things will get better for FMC...before they get worse again
That's the bad news, and it's what investors are primarily reacting to today as they sell out of the stock ahead of earnings but still sell too late to avoid losses.
The "good" news is that FMC will bounce back quickly from this Q3 shortfall. Looking a bit further out, FMC says revenues will rebound into the $1.1 billion to $1.4 billion range in Q4. That sounds like improvement, but here's the thing: According to Yahoo! Finance data, analysts were hoping to see Q4 revenues of $1.7 billion, so even FMC's good news turns out to be somewhat disappointing.
FMC management explained that the trends seen already in Q3 are "not expected to improve in the near-term," and will last through Q4 2023 and even into next year. Thus, management is forecasting full-year revenues of only about $4.6 billion through the end of 2023. (Wall Street wants to see $5.2 billion.) While not yet confirmed, it seems likely that 2024 results will be weak as well.
Long story short, for a stock trading for under 12 times trailing earnings today, FMC may look like a bargain, but with earnings predictions coming down sharply, FMC stock may not be as cheap as it looks. Caveat investor.
