FMC Corp. investors were having their worst day in more than three years on Monday after the agriculture-sciences company released a jarring revenue outlook, citing an “abrupt and unprecedented” drop in volume.
The seller of ingredients for insecticides, herbicides, fungicides and plant-health products
FMC,
said it now expects second-quarter revenue of between $1 billion and $1.03 billion, down from guidance provided on May 1 of $1.42 billion to $1.48 billion.
For 2023, FMC dropped its revenue guidance range to $5.2 billion-$5.4 billion, from $6.08 billion-$6.22 billion.
The company also lowered its guidance range for adjusted earnings before interest, taxes, depreciation and amortization (Ebitda) to $185 million-$190 million from $350 million-$370 million for the second quarter, and to $1.3 billion-$1.4 billion from $1.5 billion-$1.56 billion for the full year.
“Towards the end of May, we experienced unforeseen and unprecedented volume declines in three out of our four operating regions, as our channel partners rapidly reduced inventory levels,” said Chief Executive Officer Mark Douglas.
The stock took a 12.5% dive toward a 21-month low in midday trading, enough to pace the S&P 500’s decliners on the day. The stock was also headed for its biggest one-day selloff since it sank 12.9% on March 18, 2020.
Analyst Frank Mitsch at Fermium Research said that he would be shocked to see a big cut to guidance by some of the commodity companies he covers. But to see it from a “theoretically more stable” agricultural-chemical supplier like FMC was a surprise, he noted, and “the order of magnitude of today’s announcement is breathtaking.”
Mitsch reiterated the hold rating he’s had on the stock since August 2021 but chopped his price target to $105 from $125.
“Though we’ve admittedly been warming up to the name of late since our downgrade two years ago, this is another shock to the system and warrants further patience in our view,” Mitsch wrote in a note to clients.
FMC said it has initiated “significant” cost-cutting actions and lowered its operating-expense outlook in the second half by $60 million-$70 million.
On the bright side, the company said that the input-inflation outlook continues to improve, with significant benefit to financial results expected in the second half of the year, and that “on-the-ground consumption” of its products remains strong.
FMC’s stock has shed 23.4% over the past three months, while the Materials Select Sector SPDR exchange-traded fund
XLB,
has tacked on 1.2% and the S&P 500
SPX,
has gained 7%.
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