Why FMC Corporation Rallied Today
Key Points
FMC reported second quarter earnings that missed revenue expectations.
Management also guided to a lower revenue and earnings target for the year.
Still, the stock rallied off a depressed valuation, as mere survival appears to be a success for FMC.
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Shares of FMC Corporation (NYSE: FMC) rallied on Thursday, up 15.8% as of 12:03 p.m. EDT.
The agricultural chemicals company reported earnings last night. While the initial market reaction was negative due to a revenue miss and guidance cut, there was apparently enough good news to trigger a relief rally in this very beaten-down stock.
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FMC disappoints on revenue but gets cash infusions
In the second quarter, FMC's revenue declined by 17% to $867 million, missing expectations by $30 million. However, adjusted (non-GAAP) earnings per share of $0.26 beat expectations, despite falling an ignominious 62% from the prior year.
Despite the slight profit "beat," FMC also lowered its full-year guidance. Revenue is now forecast at $3.5 billion to $3.7 billion, down from a prior range of $3.6 billion to $3.8 billion. Adjusted EPS is forecast to be $1.34 at the midpoint, down from prior guidance of $1.76.
FMC has been in a severe downturn for the past couple of years, as many of the company's products have come off-patent, while farming margins have gone lower, pressuring both pricing and volume. FMC's debt is also over $4.5 billion as of June 30, making the situation even more dire.
FMC has been making moves to pay down debt, though. Notably, on July 1, European agricultural company Tessenderlo Group agreed to buy a 20% stake in FMC for $400 million. That's notable, as even after today's rise, FMC stock has only a $1.44 billion market capitalization. Additionally, FMC licensed its rimisoxafen technology to Corteva (NYSE: CTVA) in June for a $200 million upfront payment. In May, the company announced the sale of its loss-making India business to Crystal Crop Protection Limited for $252 million.
Those three items should help FMC pay down debt in the near term and contribute to management's goal of paying down $1 billion in debt this year.
Image source: Getty Images.
Not a great quarter, but mere survival is a positive
Perhaps the reiteration of the 2026 debt paydown target on theearnings callwas enough to cause a relief rally in FMC stock. Shares are, after all, down over 90% just since early 2023.
In any case, FMC remains an intriguing turnaround story; however, even after this year's debt paydown, its business remains questionable, and the company has fewer assets as a result of recent sales. Therefore, a bet on FMC remains highly risky and speculative.
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Billy Duberstein and/or his clients have positions in FMC and has the following options: short January 2027 $30 calls on FMC. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
