Corporate America is filing a flood of earnings releases at the moment; you could view our Recent Filings page any given day this week and get a bird’s-eye view of corporate earnings and the state of the economy right now.

Today we want to look at a few examples that, alas, are not a pretty picture.

One interesting example is FMC Corp. ($FMC), maker of pesticides, fungicides, and assorted other cides. FMC filed a Q2 earnings release this week that makes you wince: revenue down 30 percent from the year-ago period, operating income down 62 percent, net income down 77.3 percent. Even non-GAAP earnings were down 74 percent. Ouch. 

So what happened? Let’s start with the income statement, shown below in Figure 1. 

As you can see, revenue plummeted and, um… that’s pretty much the whole story.

Specifically, notice that operating expenses (selling, general & administrative, R&D, and restructuring costs) actually fell from $355.5 million one year ago to $300.6 million this quarter, a decline of 15.4 percent. But revenue plunged by roughly twice that, and hammered gross margins. 

So one can’t say FMC was overspending while revenue dried up; it wasn’t. Rather, demand for its various pesticide products fell off a cliff. 

OK, but why did revenue fall off said cliff? FMC offered an explanation near the top of its Management Discussion & Analysis:

As a result of increased inventory carrying costs and improved security of supply, growers and the distribution channel abruptly and significantly reduced purchases across all four regions during the second quarter of 2023. Volumes were down significantly driving a decline in results compared to the prior year period. However, grower consumption and demand for our innovative portfolio remains steady.

Next question, then, is whether that reduced demand from customers will continue. FMC addressed that too:

The channel's active inventory management is expected to continue. However, new launches are expected to partially offset volume headwinds. We expect adjusted EBITDA of $1.30 billion to $1.40 billion, down approximately 4 percent at the midpoint versus 2022 results. We are expecting cost tailwinds and improved mix from new products and launches to continue during the second half of 2023, which should mostly offset anticipated volume headwinds. 

An adjusted EBITDA decline of only 4 percent in latter 2023 is certainly better than the 48 percent plunge in adjusted EBITDA that FMC reported for the second quarter. But those projections do depend on several factors going FMC’s way: lower inflation (we assume that’s what “cost tailwinds” means) and new product launches that win favor with customers. 

Maybe those things will happen, but financial analysts will want to keep a sharp memory about these predictions so you can follow up with FMC executives when third quarter rolls around. So yet again, read the footnotes, people! They are brimming with detail you’ll want to know.

Meanwhile, in Microchips

Qualcomm ($QCOM) also reported a rather vertiginous plunge in revenue: $8.45 billion in the second quarter of this year, down 22.7 percent from $10.93 billion one year ago. Operating income plummeted 59.2 percent to $1.82 billion, net income down 51.6 percent to $1.8 billion.

Why so down? The gist of it, as described in Qualcomm’s MD&A, is overall “weakness in the macroeconomic environment.” Consumers and companies are buying fewer pieces of technology (smart phones especially), and those items they do buy, they’re drawing down from retailers’ existing inventory — all of which means depressed demand for new chips from Qualcomm. 

Even worse, Qualcomm reported sales declines in every significant operating segment it has. See Figure 2, below.

Will the situation for Qualcomm improve in coming quarters, as FMC expects for its business? Perhaps not. In another footnote discussing Qualcomm’s “Other” line of cost and revenue, the company discussed how it had spent $285 million on restructuring costs over the prior nine months. (Qualcomm’s fiscal year ends on Sept. 30.)

The good news: that $285 million seems to be the bulk of what Qualcomm had expected to spend on its current restructuring plan, announced earlier in fiscal 2023. 

The bad news: Qualcomm is now preparing another restructuring plan, “to consist largely of workforce reductions, and in connection with any such actions we would expect to incur significant additional restructuring charges, a substantial portion of which we expect to incur in the fourth quarter of fiscal 2023. We currently anticipate these additional actions to be substantially completed in the first half of fiscal 2024.”

So the drumbeat goes on. It’s just not a pleasant dance.