Chemical Stock Q4 Earnings Slated On Feb 11: FMC, CMP & LTHM

A few chemical companies are gearing up to report their quarterly numbers on Feb 11. Per the Zacks Industry classification, the chemical industry is under the broader Basic Materials sector. The Q4 earnings picture for the sector lacks luster. Earnings for the sector are projected to dip 0.9% despite 2.2% higher revenues, per the latest Earnings Outlook. In fact, the Basic Materials sector is among the four Zacks sectors that are expected to see lower year-over-year earnings in Q4.

Trade frictions between the United States and China pose as headwinds to the chemical industry. Trade tensions have clouded the overall demand outlook for chemicals. Softer demand from the automotive space is a concern for chemical makers. Notably, the trade conflict has slowed down demand in this major chemical end-use market in China.

Chemical companies are expected to face some seasonal sluggishness in demand in the December quarter. Companies in this space also face headwinds from a spike in costs of raw materials as a result of short supply partly due to production outages and plant shutdowns. Some of these companies are also exposed to challenges from elevated energy and logistics costs.

However, these companies are gaining from strategic measures including cost-cutting and productivity improvement, expansion into high-growth markets, operational efficiency improvement and earnings-accretive acquisitions. Moreover, a number of companies are taking aggressive price increase actions in the wake of raw material cost inflation. These actions should help them alleviate any pressure on margin. Moreover, President Donald Trump’s business-friendly tax reform should continue to contribute to the performance of U.S. chemical makers.

We take a look at three chemical companies that are gearing up to report their Q4 results on Monday.

FMC Corporation (NYSE:FMC) will report earnings numbers after the bell. The company has an Earnings ESP of +10.11% as the Most Accurate Estimate is currently pegged at $1.65 while the Zacks Consensus Estimate stands at $1.49. However, the stock carries a Zacks Rank #4 (Sell), which we caution against going into the earnings announcement. You can uncover the best stocks to buy or sell before they’re reported with our Earnings ESP Filter.

FMC has an impressive earnings surprise history. It outpaced the Zacks Consensus Estimate in the trailing four quarters, delivering a positive average earnings surprise of 7.6%.

In January 2019, FMC raised its earnings guidance for Q4 factoring in strong performance of its Agricultural Solutions unit and lower-than-expected taxes. The company now expects adjusted earnings for the quarter to be in the band of $1.62-$1.67 per share compared with its earlier guidance of $1.33-$1.43.

The Zacks Consensus Estimate for Q4 revenues for FMC stands at $1,173 million, reflecting year-over-year growth of 19.7%.

Net sales for Agricultural Solutions are expected rise around 20.6% year over year as the Zacks Consensus Estimate is pegged at $1,044 million.

Moreover, the Zacks Consensus Estimate for net sales for the company’s Lithium business stands at $127 million, reflecting a 12.4% rise on a year-over-year basis.

Strong demand and contributions from the acquisition of DuPont (NYSE:DWDP)'s Crop Protection assets are expected to drive revenues in the company’s Agricultural Solutions unit in the to-be-reported quarter. The company is also expected to gain from a lower tax rate. (Read more: Can FMC Keep the Earnings Surprise Streak Alive?)

Compass Minerals International, Inc. (NYSE:CMP) will report results after the bell. The company has an Earnings ESP of +0.84% as the Most Accurate Estimate stands at $1.81 while the Zacks Consensus Estimate is pegged at $1.80. However, it has a Zacks Rank #5 (Strong Sell), which we caution against going into the earnings announcement. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Compass Minerals beat the Zacks Consensus Estimate in two of the trailing four quarters and missed twice, resulting an average positive surprise of 0.1%.

The Zacks Consensus Estimate for revenues for the to-be-reported quarter stands at $501 million, reflecting an increase of 9.4% from the year-ago quarter.

The Zacks Consensus Estimate for sales of the company’s Salt segment is pegged at $289 million, reflecting an increase of 10.7% on a year-over-year basis. The same for the Plant Nutrition North America segment stands at $86 million, representing year-over-year growth of 22.9%.

Moreover, the Zacks Consensus Estimate for Plant Nutrition South America segment sales stands at $122 million, reflecting a decline of 1.6% from the year-ago quarter.

The company’s Salt unit will likely benefit from higher expected contract pricing for highway deicing products and increased sales volumes. However, higher logistics costs are likely to affect the division’s margins. Moreover, the company’s Plant Nutrition North America unit is likely to gain from higher demand for micronutrients. Meanwhile, results in the Plant Nutrition South America segment will likely be affected by unfavorable currency translation.

Livent Corporation (NYSE:LTHM) will report earnings after market close. It has an Earnings ESP of 0.00% as both the Most Accurate Estimate and the Zacks Consensus Estimate are pegged at 23 cents. The stock carries a favorable Zacks Rank #3 (Hold), but its ESP makes surprise prediction difficult.

Livent started trading on the NYSE in October 2018 after its IPO. The company delivered a positive earnings surprise of 19% in the last reported quarter.

The Zacks Consensus Estimate for revenues for the to-be-reported quarter stands at $125 million.

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