FMC Corp (FMC) shares are down 55.75% over the past year with a bunch of operational missteps but a former top quality name worth a closer look at these levels as we are seeing some interesting notable put sales.

Options The main trade that stood out was an opening sale of 600 January 2025 $60 high Delta puts on 1/9 for $589K, a trade willing to be long 60,000 shares at $50.60 cost-basis, a position size of more than $3M. FMC has also seen April $55 short puts open 1100X and April $50 short puts open 4000X.

Technical: FMC’s monthly is the most oversold it has been in history and shares trading below the 200-month moving average, but the low in 2023 tagged a major volume node of support and held right near the 76.4% Fibonacci and key long-term VPOC.

Fundamentals: FMC Corporation is a global agricultural sciences company dedicated to helping growers produce food, feed, fiber and fuel for an expanding world population while adapting to a changing environment. FMC’s innovative crop protection solutions enable growers, crop advisers and turf and pest management professionals to address their toughest challenges economically without compromising safety or the environment. FMC is committed to discovering new insecticide, herbicide and fungicide active ingredients, product formulations and pioneering technologies that are consistently better for the planet. The three principal categories of agricultural and non-crop chemicals are: insecticides, herbicides, and fungicides, representing approximately 40 percent, 29 percent and 28 percent of global industry revenue, respectively. FMC expects that Destocking bottoms in 1H24 and has been undergoing a restructuring to drive cost efficiencies.FMC is changing its portfolio to outgrow the market in coming years.

FMC sees a bright future ahead with its goals outlined at the November Investor Day below. The full presentation can be found at https://investors.fmc.com/events-and-presentations/default.aspx

Valuation: FMC has a market cap of $7.25B and trades 13.1X Earnings, 2.2X Book and 10.3X FY24 EBITDA with a 4% dividend yield and forecasted 8.4% FCF yield. FMC revenues are seen rising 2.4% in 2024 with acceleration sequentially throughout the year on easing comps while EBITDA seen rising 8.8%, the bottom of the earnings cycle likely in place. FMC historically trades in the 9-13X EBITDA range making shares cheap currently. Concerns over generic competition to its insecticide franchise have weighed.

Industry: The agrochemicals industry is more consolidated following several mergers of the leading crop protection companies, which now include FMC, ChemChina (owner of Syngenta Group, which includes the former Syngenta and Adama), Bayer AG (acquired Monsanto in 2018), BASF AG and Corteva Agriscience. These five innovation companies currently represent approximately 71 percent of the crop protection industry’s global sales. The industry has been under pressure from channel destocking, a rise in short-term interest rates and competitive pricing but most of these headwinds look to be nearing an end.

Themes: Biologicals is a key growth market inside the larger market driven by integration of biologicals with synthetic crop protection products, enabled by precision applications, digital solutions, and data analytics. Diamides Continue to Gain Share in the Global Insecticide Market, made up 15% of the global insecticide market in 2022 and increased 11% CAGR from 2016 to 2022, outpacing every other insecticide class. FMC’s diamides make up ~80% of the overall diamides class.

Ownership: FMC insiders have been buying shares with the CEO in May buying $476K of stock at $115.53/share, the EVP and Controller in September purchasing $225K of stock at $75.60/share and I November a Director buying $200K of stock at $52.48/share. Hedge Fund ownership rose 12.65% in the latest quarterly filings and a fairly concentrated position in some smart funds like Jackson Square, Tweedy Browne and New South. Short interest at 3.4% of the float is fairly low but has risen 140% Q/Q.

Analyst Notes: KeyBanc reiterated FMC as a top pick last week expecting volumes to snap back as destocking ends. Roth MKM started shares Buy on 1/3 as headwinds wane including fears of generic competition to its diamide insecticide franchise.

Management Commentary: Taking a look at FMC’s November Investor Day…

“We are maintaining or gaining market share at the grower level in all regions, while continuing to see good traction for our new products. We fully expect the destocking reset is transitory and that the channel will begin to rebalance and ease back into somewhat more normal patterns as we enter mid-2024.”

“FMC’s differentiated portfolio has solid traction with pricing for value. Growth is being driven by a continuing introduction of new molecules and new formulations. We have a broad part of herbicides, fungicides and insecticides, including our industry-leading diamides that our R&D team continues to enhance with new patented formulations. Our Plant Health business has an expanding portfolio of differentiated products driven by our biologicals.”

“Looking ahead, once the industry is past destocking, we anticipate the global crop protection market will see low to mid-single-digit growth over the next 10 years, which we estimate may range from 1% to 4%. There are a number of factors which will influence the ultimate growth rate the magnitude of each factor and how the factors interact will impact where in the range the rate lands. These factors include commodity prices, the speed of adoption of new technologies, interest rates, heightened concerns for food security and extreme weather events.”

“Ultimately, while generics will enter the market with basic diamide products, FMC’s proven formulations will continue to stand out in terms of performance and value, which will drive farmer — further farmer adoption.”

“Agriculture is evolving, and the size, scope and diversity of our portfolio enables us to meet growers’ needs today and in the future. The future of agriculture prioritizes sustainable yield on the acre. We will see acceleration of the use of more modern inputs, everything from precision ag to biologicals and more modern chemistries like the diamides. Using these tools in combination growers will achieve more production out of the land they cultivate, which is vital to feed the ever growing world population. And they will have to do so without creating more farm land while using less water, less energy and less labor, all with reduced environmental impact.”

Recap: FMC remains a high-quality company with a strong outlook for the next decade and many industry-leading financial metrics. Generic competitions certainly warrants monitoring but the end of destocking and return to growth in 2024 should stabilize its multiple which is near the low-end of the historical range, supportive of a bottom being in place in 2023, and a good candidate for put selling.

Trade to Consider: Giving a bit more room for error, selling January 2025 $55 puts to open near $8 is a willingness to be long shares at a $47 cost-basis, 19% below the current price and implying paying a 8.35X multiple on 2024 EBITDA.