NEW YORK (AP) -- FMC Corp.'s sector outperformance and improved credit quality prompted a Moody's analyst to upgrade the chemical company's ratings Tuesday.

This comes a day after the ratings company said it had put FMC's debt ratings on review for a possible upgrade one notch higher.

William Reed of Moody's Investor Service upgraded the company's senior unsecured debt ratings to "Baa1" from "Baa2." "Baa1" is the highest level considered "lower medium grade" investment-quality debt.

Reed said the company's business profile, strategy and new leadership in 2010 merit the rating, despite unstable economic conditions.

"The upgrade reflects Moody's belief that the company has made significant progress improving credit metrics," Reed said.

Despite year-over-year declines in revenue and earnings before interest, taxes, depreciation and amortization, FMC's performance this past year has outperformed most companies in the chemical industry, he said, adding that FMC is better positioned to weather the impact of high petrochemical feedstock and energy costs than other commodity companies.

Reed assigned a "Stable" rating for the company's outlook, which reflects his expectation that the company will generate at least $105 million of free cash flow in 2009 and that it will sustain the current volume of business in 2010.

Reed said he's waiting to assess FMC's new leadership before considering another upgrade. After this period, if better-than-expected demand results in strong cash flow levels, Reed said he could consider bumping FMC's rating up another notch.

Shares of the company fell 26 cents to $56.52 in afternoon trading.