Investing.com -- KeyBanc Capital Markets analysts said on Wednesday the recent sell-off in FMC Corp . (NYSE:FMC) shares is “overdone.” The investment maintained an Overweight rating on the stock while reducing the target price to $69 from $79.
FMC shares rose 1.5% during the Wednesday session.
KeyBanc’s comments come in the wake of a period of significant underperformance by FMC stock, which has hit new lows not seen since 2017 and trailed the S&P 500 by 114% over the last two years and 28% since early November.
KeyBanc analysts suggest that the market has overly discounted FMC's potential challenges, presenting an attractive entry opportunity.
“We advocate value-oriented contrarian investors consider FMC, which stands out as one of the best risk/rewards in our coverage,” analysts led by Aleksey Yefremov said.
The firm believes that FMC's EBITDA will see a 14% improvement by 2025, as the company continues its recovery that began in the second quarter of 2024.
Despite the downward revision in the earnings forecast, KeyBanc views FMC stock as undervalued, trading at 9.5 times its expected 2025 EV/EBITDA.
“The shares do not discount any additional recovery post 2025, in our view, while we see an additional 20-25% upside to EBITDA in 2026-2028,” analysts continued.
“We see shares as inexpensive even assuming severe scenarios for FMC's diamides franchise, which will start seeing generic competition gradually building up in some applications in 2026-2028,” they added.
KeyBanc also noted that while FMC is expected to report a slight dip in 4Q24 EBITDA due to foreign exchange (FX) impacts, the results should remain within the guidance range, albeit towards the lower half.
The company is actively managing its pricing strategy to reclaim market share, and its execution on price and volume is believed to be in line with management's expectations.
The devaluation of the Brazilian Real (BRL), which has fallen 12% against the US dollar since the end of September, is identified as one of the negative factors affecting FMC's share performance recently. However, KeyBanc points out several mitigating factors that could lessen the impact on FMC.
These include the fact that only about 35% of FMC's list prices in Brazil are in BRL, with frequent adjustments to these prices, and the remainder of the sales are dollarized.
Moreover, FMC has hedged most of its key FX exposures for the fourth quarter and has some hedges in place for 2025. Also, a weaker BRL may benefit Brazilian export-oriented farm economics. As a historical reference, in 2020, a year marked by significant FX challenges, FMC managed to recoup roughly 45% of the currency headwind through local price increases.
