FMC Stock Plummets 46% on Horrendous Guidance

An Amish farm in Lancaster, Pennsylvania. (PAUL NOLP/AFP via Getty Images)

Key Points

• FMC shares plunge after the crop chemical maker provides disappointing guidance.
• FMC expects third-quarter sales of $65 million to $125 million, far below Wall Street expectations of $869 million.
• CEO Pierre Brondeau says third-quarter demand was weaker than expected due to challenging market conditions and elevated inventory levels.

Shares of crop chemical maker FMC plunged in premarket trading Thursday after the company provided deeply disappointing guidance.

FMC stock was down 46% at $4.40 in premarket trading, while S&P 500 futures were off 0.2%.

The company expects third-quarter sales of $65 million to $125 million and adjusted earnings before interest, taxes, depreciation, and amortization (Ebitda) of negative $565 million to negative $510 million.

Wall Street was expecting sales of $869 million and Ebitda of $133 million.

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The scale of the miss is hard to understand. The numbers include $625 million to $675 million for “commercial actions to lower the price of select products held by channel customers in key markets and to modify the selling and pricing model in the United States.”

“Third-quarter demand was weaker than we expected, driven by challenging market conditions and elevated levels of higher-priced FMC products held in inventory,” said CEO Pierre Brondeau in a news release. “We have addressed this issue incrementally over several quarters, but under current market conditions, we determined that more comprehensive actions are necessary.”

One of the commercial actions seems to be simply deeply discounting product held by distributors to better reflect current market conditions. FMC also is adjusting its pricing model in the U.S., moving away from a high-price, high-rebate model to a simpler pricing structure.

Coming into Thursday’s trading, FMC stock has declined 73% over the past 12 months.

The company has struggled with high debt and weakening sales. FMC reported $5.8 billion in 2022 sales, when crop prices were higher. Sales in 2027 are expected to be $3.7 billion.

At the end of the second quarter, the company carried more than $4 billion in short- and long-term debt, more than five times expected 2027 Ebitda. That’s a high ratio. Industrial companies in the S&P 500 typically operate below two times.

The FMC guidance has the chance to hit the rest of the sector. Crop chemical maker Corteva’s stock was down almost 8%. Shares of fertilzer maker Mosaic and machinery maker Deere were unaffected.

Write to Al Root at allen.root@barrons.com.

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