October 22, 2008 - FMC Corp. (FMC-NYSE) a chemical company, provides solutions, applications, and products to various end markets worldwide. It operates through three segments:Agricultural Products, Specialty Chemicals, and Industrial Chemicals.

The Specialty Chemicals segment produces microcrystalline cellulose that is used as drug dry tablet binder and disintegrant, and food ingredient; carrageenan, which is used as a food ingredient for thickening and stabilizing, encapsulant for pharmaceutical and nutraceutical applications; alginates that are used as food ingredients, and for pharmaceutical excipient, wound care, orthopedic uses, and industrial uses; and lithium that is used in pharmaceuticals, polymers, batteries, greases and lubricants, air conditioning, and other industrial applications.

The Industrial Chemicals segment produces soda ash for glass, chemicals, and detergents; peroxygens for pulp and paper, chemical processing, detergents, antimicrobial disinfectants, environmental applications, electronics, and polymers; and phosphorus chemicals for detergents, cleaning compounds, and animal feed. FMC Corporation was founded in1884 and is based in Philadelphia, Pennsylvania.

In June of this year, the stock hit $80.23, an all-time high (split adjusted for a 2 for 1 split late last year). It came down to $30 a share on October 10. Now you can buy all you want at $35. What happened and more importantly, what might happen?

What happened: market meltdown and global economic slowdown. With the U.S. and China leading the way, robust economies have withered, reducing demand for many of FMC's products. Investors fear the worst and are selling the stock down to valuations not seen in a long, long time.

Here's what might happen: Analysts see earnings of $1.02 for the third quarter (ended September 30). Earnings will be announced on October 28. Last year's third quarter showed 69 cents. For the fourth quarter, look for 87 cents, up from 59 cents last year. For the full year, 8 analysts have a consensus for $4.35 a share, up from $3.09 last year. Next year, 7 of them show a consensus of $5.32.

If you look at those earnings and the price of $35, you see the P/E ratio for this year is 8, and next year, it's 6.6. In the last 16 years, the stock has not traded at those valuations. The average annual P/E ratio for that period of time ranged between 9.1 and 20.5. Of course, the analysts have to be right in their projections for these P/E numbers to be valid.

There's probably going to be some reworking of the earnings numbers after the quarterly report on October 28, but here's what research and history shows now. For the last 5 years, FMC has recorded double digit earnings growth with all 3 of its divisions doing very well. Agriculture Products are the clear best sellers. All regions and products have better revenues. The group showed a 30% increase in earnings in the second quarter to $84 million. With ever increasing demand for food, agrichemicals should continue to see good growth.

Industrial chemicals are also doing well, helped by supply constraints and high demand for soda ash. Earnings more than doubled in the second quarter to $45 million with revenues up 25%. Soda ash producers in the U.S. are running at full capacity to meet demand, and there's limited new production so price increases will most likely continue.

It's the agriculutural demand that appears to offer the best reason for continued success. Asia and India are almost insatiable markets as populations continue to grow.

Even with all the good news, the stock is lower. But then so is the rest of the market. It may be that investors are selling everything, no matter what the valuation. Or it could be specific to the stock as investors worry about continued growth as global economies slow.

More numbers: Market Cap is $2.62 billion. Price to Book is 2.25. Profit margin is 9% and Operating margin is 16.7%. Revenues were $2.86 billion for the last 12 months. There's $123 million in cash. Debt to Equity is .456. Current ratio is 1.95. Beta is 1.37. There are 74.8 million shares outstanding. The dividend is 50 cents a year for a yield of 1.3%.

FMC has delivered good earnings growth for 5 years. Management has managed capital well, as reflected in the very high Return on Equity. How well the company can navigate the turbulent waters of economic hardships is yet to be seen. Certainly the analysts' forecasts will be revised after the quarterly report next week. But once there are some revisions, this stock may still be selling at very compelling valuations. Follow this one if you're looking for a chemical company.

- Company Web site: www.fmc.com

- Ted Allrich