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FMC Corp. (FMC) Faces End-Market Challenges, Forex Headwind


On Oct 12, we issued an updated research report on chemical company FMC Corp. FMC.

While FMC Corp. should gain from strategic investments, Cheminova A/S acquisition and new product launches, it remains exposed to a number of headwinds.

FMC Corp. faces challenging agriculture market fundamentals. Conditions in Brazil still remain weak, evident from a decline in volumes due to lower demand. Reduced acreage is affecting demand for crop protection products in the country. The agricultural market conditions are also expected to remain challenging in North America in 2016 due to elevated channel inventory levels and expected lower farm incomes.

Revenues from the company’s Agricultural Solutions division fell around 12% year over year in second-quarter 2016, partly due to lower volumes. FMC Corp., in August, lowered the revenue expectation for its Agricultural Solutions unit to roughly $2.2-$2.4 billion for 2016 from the previous guidance of $2.3-$2.5 billion.

The global crop protection market continues to face several woes, which has resulted in a difficult operating environment. FMC Corp. expects the global crop protection chemical market to decline by a mid to high single-digit clip in 2016 due to weak conditions in North America and Brazil.

FMC Corp. is also exposed to currency headwinds, stemming from a strong U.S. dollar. Currency hurt sales and earnings in the company's Agricultural Solutions segment in the second quarter and may continue to affect the division’s results in the third quarter. The company’s health and nutrition business is also susceptible to currency headwinds due to its significant euro exposure.

FMC Corp. currently holds a Zacks Rank #4 (Sell).



Stocks to Consider

Some better-ranked companies in the chemical space include Univar Inc. UNVR, The Chemours Co. CC and Cabot Corp. CBT.

Univar sports a Zacks Rank #1 (Strong Buy). The company has an expected earnings growth of 244.4% for the current year. You can see the complete list of today’s Zacks #1 Rank stocks here.

Chemours has an expected earnings growth of around 20.3% for the current year. The stock carries a Zacks Rank #1.

Cabot, currently holding a Zacks Rank #2 (Buy), has an expected earnings growth of roughly 12.1% for the current year.

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