Why FMC’s guidance is a warning to all farm stocks, even indomitable monasteries

“We experienced an unexpected and unprecedented decline in volume in three of our four operating regions as our channel partners rapidly reduced inventory levels,” CEO Mark Douglas said in the press release.

FMC sells to dealers and dealers sell to farmers. The buying behavior of the merchant and the buying behavior of the farmer are not always identical.

FMC now expects second-quarter revenue to be in the range of $1 billion to $1.03 billion. The company previously expected second-quarter revenue to range between $1.42 billion and $1.48 billion. Revenue for the fiscal year is now expected to be between $5.2 billion and $5.4 billion. This is lower than the previous forecast of $6.08 billion to $6.22 billion.

“The volume of today’s announcement is staggering,” Fermium Research analyst Frank Mitch wrote in a report. He valued the stock and lowered his price target to $105 from $125.

Shares of FMC were down nearly 15% at midday, at $88.97. the

Standard & Poor’s 500

was flat and

Dow Jones Industrial Average

It rose 0.3%. FMC stock is now down about 29% in 2023.

Cortiva shares
And

Maker of seeds and chemicals for farmers, they were also pulled, from more than 5%. “FMC relies on distributors a lot more than Corteva, for that [I] Think more about the FMC issue,” Mitch said Barron. “[I’d] Be disappointed/surprised if we see similar evidence from Corteva.”

He evaluated buying Corteva (CTVA) stock and has a price target of $72 per share.

Farmers buy seeds and chemicals for the crops every season. They buy tractors and heavy equipment every few years. Demand is less volatile from growing season to growing season. That’s why Deere (DE) stock doesn’t react as much in Monday’s trading, with shares down just 0.2%. Shares of CNH Industrial (CNHI) and AGCO (AGCO) rose on Monday.

However, the lack of reaction should not make investors complacent. Farmer’s health will become a matter of upcoming earnings phone calls. Corn prices have fallen about 25% over the past six months. Soybean prices fell about 10% over the same period. Lower commodity prices mean less liquidity for farmers. FMC seems to have taken the first hit from that dynamic.

FMC also said in its news release that it implemented “significant cost-mitigation measures” that lowered its prior operating expense estimates in the second half of the year by $60 million to $70 million.

It’s usually a good idea to cut costs when things are slowing down. This is not enough for investors though. They prefer strong demand.

FMC is scheduled to report its second-quarter earnings on August 2, after markets close.

Write to Angela Palumbo at [email protected]