Bear of the Day: Sociedad Quimica y Minera (SQM)

Sociedad Quimica y Minera de Chile produces and distributes specialty plant nutrients and fertilizers, lithium derivatives, and industrial chemicals. The company provides potassium chloride and sulfate for crops such as corn, rice, wheat, and sugar. It also provides iodine for use in medical, industrial, and pharmaceutical applications.

In addition, SQM offers lithium carbonates for various applications such as materials for batteries, air-conditioning chemicals, and heat-resistant glass. Sociedad Quimica y Minera was incorporated in 1968 and is headquartered in Santiago, Chile.

The Zacks Rundown

SQM stock is a Zacks Rank #5 (Strong Sell) and is a component of the Zacks Chemical - Specialty industry group, which ranks in the bottom 40% out of approximately 250 Zacks Ranked Industries. As such, we expect this industry group as a whole to underperform the market over the next 3 to 6 months, just as it has over the course of the past year:

Candidates in the bottom tiers of industries can often be potential short candidates. While individual stocks have the ability to outperform even when included in a poorly-performing industry group, the inclusion in a weaker group serves as a headwind for any potential rallies and the journey forward is that much more difficult.

As a part of this group, SQM stock has experienced considerable volatility in 2025; shares recently touched a 52-week low earlier in June. The stock has not participated much in the recovery off the general market’s April lows, signaling low investor confidence.

Recent Earnings Misses and Deteriorating Outlook

SQM has fallen short of earnings estimates in each of the past four quarters. The company most recently reported first-quarter earnings back in May of 48 cents per share, missing the $0.63/share consensus estimate by 23.8%. Earnings plunged 40% from the same quarter in the prior year.

The fertilizer company has missed earnings estimates by an average of 23.9% over the past four quarters. Consistently falling short of earnings estimates is a recipe for underperformance, and SQM is no exception.

Sociedad Quimica y Minera SQM has been on the receiving end of negative earnings estimate revisions as of late. For the second quarter, analysts have decreased estimates by 25.97% in the past 60 days. The Q2 Zacks Consensus EPS Estimate now stands at $0.57/share, translating to negative growth of -24% relative to last year.

Falling earnings estimates are a huge red flag and need to be respected. Negative growth year-over-year is the type of trend that bears like to see.

Technical Outlook

As illustrated below, SQM stock is in a sustained downtrend. Notice how shares have plunged below both the 50-day and 200-day moving averages signaled by the blue and red lines, respectively. The stock is making a series of lower lows, with no respite from the selling in sight. Also note how both moving averages have rolled over and are sloping down – another good sign for the bears.

While not the most accurate indicator, SQM stock has also experienced a death cross, wherein the stock’s 50-day moving average crosses below its 200-day moving average. SQM would have to make a stern move to the upside and show increasing earnings estimate revisions to warrant taking any long positions in the stock. Shares have fallen more than 25% in the past year alone. 

Final Thoughts

A deteriorating fundamental and technical backdrop show that this stock is not set to hit new highs anytime soon. The fact that SQM is included in one of the worst-performing industry groups provides yet another headwind to a long list of concerns.

A history of earnings misses will likely serve as a ceiling to any potential rallies, nurturing the stock’s downtrend.

SQM shares continue to experience substantial volatility and have widely underperformed this year. With negative earnings estimate revisions continuing to pile up, this stock should be avoided as there are plenty of better alternatives in the current market environment.

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This article originally published on Zacks Investment Research (zacks.com).

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