Baird Upgrades FMC On Prospects Of Above-Market Revenue Growth For Several Years

FMC Corp (NYSE: FMC) seems well-positioned to generate top-line and adjusted EBITDA growth in 2020 and beyond, driven by new product launches, share gains in key markets and operating leverage, according to Baird.

The Analyst

Baird’s Ben Kallo upgraded FMC from Neutral to Outperform, raising the price target from $86 to $95.

The Thesis

FMC’s potential to generate strong free cash flows could offer return of capital to shareholders through dividends and share buybacks, or lead to the company investing in growth, like undertaking merger and acquisition activity, resulting in multiple expansion over time, Kallo said in the upgrade note.

He explained that FMC’s free cash flow generation is supported by improving working capital, lower legacy and transformation costs as well as moderate capital expenditure needs.

The analyst expects FMC’s diamides franchise to achieve high-single to low-double-digit growth over the next several years, backed by the launch of new formulations and the company entering into commercial agreements to supply molecules to third parties.

Diamide is a chemical insecticide commonly used on farms.

FMC has been generating around 5% to 7% top-line growth, which is not impacted by the global business cycle, as is the case with its specialty chemical peers, Kallo mentioned. He said that FMC could be “a safe-haven in the space,” while adding that the company’s above-market revenue growth could continue for several years, driven by share gains in geographies like Asia and Latin America as well as new product launches.

Price Action

Shares of FMC were up 2.31% at $84.94 Wednesday.

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