US Machinery: Machinery Call Series Takeaways on Ag

Research evidence excerpt

US Machinery: Machinery Call Series Takeaways on Ag

e levels, it could impact demand for new equipment and DE stock as a result. If grain prices inflect higher, this could drive

upside to our DE target price and estimates.

Raw Material Cost Inflation to Pressure Margins. We think DE will be able to partially offset material cost inflation in steel and

other parts of its supply chain through price increases, but to the extent the company is unable to accomplish this, profit

margins may be lower than we expect. If DE can manage to realize more favorable price/cost than we expect, this could drive

upside to our estimates.

FMC

(FMC.N; US$11.5; 2H; 30 Jun 26; 16:00)

Valuation

We apply a ~8.0x EV/EBITDA multiple to our 2027 EBITDA estimate of ~$743mm, resulting in a $14 target price. We think FMC

should trade at a discount to its closest competitor due to high-net leverage and some discretionary pressure on Crop

Protection chemicals. FMC's FY2 EV/EBITDA multiple has ranged between ~8.0-13.5x, with an average of ~11x over the past

five years. We think a multiple close to the low end of the range is appropriate to reflect balance sheet pressure and uncertainty

in execution of its growth strategy.

Risks

This stock is High Risk based on our quantitative model, and we believe this classification is appropriate for FMC due to recent

stock price volatility, elevated leverage, dividend risk, and uncertainty in execution of its diamides strategy.

We note the following risks to the shares achieving our target price:

Exposure to Cyclical Ag End-Market: FMC’s core business is in providing agricultural crop protection solutions, so it is heavily

dependent on farmers’ profitability and how much they are willing to allocate to crop inputs. FMC’s business is largely sensitive