Morningstar | FMC Reports High-Level 2018 Results; Raising Fair Value Estimate on Improved Near-Term Outlook. See Updated Analyst Note from 04 Feb 2019
FMC reported high-level 2018 results that were above our expectations as greater agricultural solutions segment performance and lower taxes increased profits. FMC's 2019 guidance of agricultural solutions revenue growth of 4%-6% and EBITDA growth of 5%-9% are in line with our forecast. Having updated our model to reflect the higher-than-expected 2018 results, we're increasing our FMC fair value estimate to $92 per share from $91. Our narrow moat rating, based on intangible assets related to the company's patented crop protection chemicals products, remains intact.The market responded favorably to the news, sending shares up over 7.5% to $85.83. At current prices, we view FMC as fairly valued on a risk adjusted basis, with shares trading only slightly below our $92 fair value estimate.
FMC is scheduled to report full earnings on Feb. 12, at which time we expect to learn more details of what drove higher agricultural solutions results. We note that later this year, FMC plans to spin off its majority stake in Livent, which was formerly FMC's lithium business. We continue to be in favor of this transaction as the separation has created two focused businesses that no longer have to compete for capital allocation.
FMC is an agricultural sciences company. The company provides solutions to growers around the world with a product portfolio fueled by a discovery and development pipeline in crop protection, plant health, and personnel pest and turf management. This combination of technologies includes insect control products based on Rynaxypyr? and Cyazypyr? active ingredients; Authority?, Boral?, Centium?, Command? and Gamit? branded herbicides; Talstar? and Hero? insecticides; and flutriafol-based fungicides. The company's products are used in agriculture to improve crop yield and quality by controlling a range of insects, weeds and disease, as well as in non-agricultural markets for pest control.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors.
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