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Among the three major lithium stocks available to investors today, FMC Corp. (NYSE: FMC) has performed the best since the beginning of 2018. It's not really a close race. The company has seen its shares slide 11.5%, while the stock prices of peers Albemarle (NYSE: ALB) and Sociedad Quimica Y Minera De Chile (SQM) (NYSE: SQM) are down more than 25% apiece.
Turns out there's a good reason for the divergence: In the first half of 2018, FMC Corp. derived 92% of revenue and 87.5% of segment EBITDA from its agricultural solutions business. It's still one of the top lithium stocks and producers, but the fate of the business and stock is largely dictated by the strength of its pesticide sales. Judging from second-quarter and first-half 2018 earnings results, that's not exactly a bad deal for investors.
But with the upcoming spinoff of the lithium segment in October 2018, is FMC Corp. stock a buy right now, or should investors wait?
Image source: Getty Images.
By the numbers
In March 2017, FMC Corp. stepped in to help Dow Chemical and DuPont complete their megamerger by buying a significant portion of the latter's crop protection business. Upon closing in November 2017, the acquisition made FMC Corp. one of the world's largest agricultural technology companies virtually overnight. The impact is easy to see when comparing first-half 2018 operating results to the year-ago period.
| Metric | First Half 2018 | First Half 2017 | Change (YOY) |
|---|---|---|---|
| Total revenue | $2.47 billion | $1.25 billion | 97% |
| Agricultural solutions, revenue | $2.26 billion | $1.11 billion | 103% |
| Lithium, revenue | $210 million | $139 million | 51% |
| Total segment EBITDA | $801 million | $269 million | 197% |
| Agricultural solutions, EBITDA | $700 million | $215 million | 225% |
| Lithium, EBITDA | $101 million | $53.5 million | 90% |
| Total net income | $397 million | ($49.5 million) | N/A |
Source: FMC Corporation press release.
The agricultural solutions business continues to exceed all expectations. At the time the acquisition was announced, management expected the segment to deliver about $3.8 billion in annual revenue. The latest full-year 2018 guidance calls for the segment to generate $4.1 billion to $4.3 billion in sales and EBITDA in the neighborhood of $1.2 billion. Much of that is due to the strength of the insecticides portfolio, which recorded nearly as much revenue in the first six months of this year as the entire company did in the year-ago period.
A strong agricultural portfolio is exactly what investors want to see prior to the separation of FMC Corp. into two companies. That's especially true with the lithium segment, which will become Livent Corp. in October 2018, humming along. During the first half of 2018, nearly half of the segment's revenue was derived from high-grade lithium hydroxide -- the sought-after material for lithium-ion battery manufacturing and also the highest-margin lithium material. Management expects the lithium segment to generate full-year 2018 revenue in the neighborhood of $445 million and EBITDA of around $200 million.