Opinions
Liz Ann Sonders
FMC Corp
FMC-N
TOP PICK
Jun 18, 2004
Stock price when the opinion was issued
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Premium contentThis global producer of agricultural herbicides and insecticides, recently reported a 49% increase in free cash flow. North American sales are up 24% over the year and management expects a 15% increase in earnings over the second half of 2024. It trades at 19x earnings, under 2x book and supports a 36% ROE. Its dividend is backed by a payout ratio under 20% of cash flow. We recommend setting a stop-loss at $52, looking to achieve $72 -- upside potential of 17%. Yield 3.7%
(Analysts’ price target is $71.94)Premium contentPremium contentFMC, $4B market cap, down 47% in the past year, is very cheap at 9X earnings, with a 7.2% dividend. But debt is extremely high (more than 10X recent 12-month cash flow) and earnings have stalled. 2026E EPS is expected to be less than it was seven years ago. The Q2 was decent, but free cash flow has been running negative on a 12-month basis. It did affirm guidance, but this is really a debt issue. If the global economy slows, their business is not likely to see big growth, but of course the debt will still be there. Going into year end tax selling we would sit this one out. We have no idea how Morningstar sees it tripling.
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