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Key Predictions for Q3 Earnings Reports of FMC, IFF

A couple of chemical companies are gearing up to report their quarterly numbers on Nov 6.  Per the Zacks Industry classification, the chemical industry is grouped under the broader Basic Materials sector. Based on the latest Earnings Outlook, 69.8% of the sector participants on the S&P 500 index reported their quarterly numbers as of Nov 1. Earnings for these companies are up 8% from the same period last year on 3.6% higher revenues. Overall third-quarter earnings for the sector are projected to decline 2.3% while revenues are expected to increase 10.7%.

The chemical industry has enjoyed a positive run this year, helped by continued strength across major end-use markets such as construction, electronics and automotive. Chemical companies continue to shift their focus to attractive, growth markets. Moreover, they remain actively focused on mergers and acquisitions to diversify and shore up growth.

Strategic measures including productivity improvement, pricing actions, portfolio restructuring and earnings-accretive acquisitions are expected to drive the performance of chemical makers in the third quarter. Cost-cutting measures and productivity improvement actions by chemical companies should continue to yield industry-wide margin improvements. Synergies from acquisitions should lend support to earnings in the third quarter.  

We take a sneak peek at two chemical companies that are scheduled to report their third-quarter results on Nov 6.

FMC Corporation FMC will report after the bell. It has an Earnings ESP of 0.00% as both the Most Accurate estimate and the Zacks Consensus Estimate are pegged at 63 cents. FMC Corp. currently sports a Zacks Rank #1 (Strong Buy), which increases the predictive power of ESP. However, the company has an ESP of 0.00% that makes surprise prediction difficult. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

The company beat the Zacks Consensus Estimate in two of the trailing four quarters while missed in the other two, delivering an average negative surprise of 1.7%.

The Zacks Consensus Estimate for revenues for the to-be-reported quarter stands at $690 million, reflecting a decline of 14.6% from the year-ago quarter.

Net sales for FMC Corp.’s Agricultural Solutions segment is expected to rise 4.3% year over year while remaining flat sequentially as the Zacks Consensus Estimate for the third quarter is pegged at $583 million. Segment income is expected to increase 15.6% sequentially and 23% year over year as the Zacks Consensus Estimate is $111 million.
Moreover, the Zacks Consensus Estimate for net sales for the Lithium unit is projected to be $103 million, reflecting a 47.1% rise year over year and a 39.2% increase on a sequential comparison basis. Segment income is also expected to surge 96.6% year over year and 42.3% sequentially as the Zacks Consensus Estimate stands at $34.4 million.

While FMC Corp. is faced with challenging agriculture market fundamentals and pricing headwinds, it is benefiting from its strategic investments, acquisitions and efforts to expand its market position and strengthen its portfolio. Strong momentum in its Lithium unit is also expected to continue to supports results in the to-be-reported quarter. However, weaker prices contributed to lower earnings in the company’s agriculture business in the second quarter and are expected remain a headwind in the third. (Read more: What's in the Offing for FMC Corp in Q3 Earnings?)

FMC Corporation Price and EPS Surprise


FMC Corporation price-eps-surprise | FMC Corporation Quote

International Flavors & Fragrances Inc. IFF, which will report after the close, has an Earnings ESP of -0.53% as the Most Accurate estimate stands at $1.41 cents while the Zacks Consensus Estimate is pegged at $1.42. The company has a Zacks Rank #4 (Sell). We caution against stocks with a Zacks Rank #4 or 5 (Strong Sell) going into the earnings announcement.

You can see the complete list of today’s Zacks #1 Rank stocks here.

In the last four quarters, the company delivered better-than-expected results in two, while lagged in the others. The average earnings surprise was a positive 0.9%.

The Zacks Consensus Estimate for revenues for the to-be-reported quarter stands at $852.7 million, reflecting an expected increase of 9.7% from the year-ago quarter.

For the company’s Flavors segment, the Zacks Consensus Estimate for revenues stands at $403 million, reflecting a 9.8% year-over-year rise. However, this reflects a 2.7% decline on a sequential comparison basis. Revenues from the Fragrances segment is expected to rise 7.3% year over year and 2.6% sequentially as the Zacks Consensus Estimate is pegged at $440 million.

Difficult operating conditions in Latin America, unfavorbale currency translation and higher raw material costs may affect the company’s segment results in the to-be-reported quarter. Adding to the concerns is an unfavorable impact of industry competition. (Read more: Will International Flavors Disappoint in Q3 Earnings?)

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