Agrium: Risk-Reward Balanced - Analyst Blog

By
A A A

On May 23, we issued an updated research report on Agrium Inc. ( AGU ). While the fertilizer maker is poised to benefit from strength in the agriculture and crop input market, it is exposed to a soft wholesale pricing environment and certain near-term challenges.

Agrium's profit dropped year over year in the first quarter of 2014, reported on May 6, due to bad weather and lower nutrient pricing. Revenues fell as gains in the core retail business were more than offset by a double-digit decline in the wholesale franchise.

Agrium, a Zacks Rank #3 (Hold) stock, follows a strategy to grow along the value chain through a combination of acquisitions and organic development. The acquisition of Viterra Inc's agri-products business is an excellent fit to Agrium's portfolio, allowing it to offer highly competitive products, services and technologies by combining its experience with Viterra's profound knowledge of western Canadian agriculture.

Agrium stands to gain from overall strong fundamentals for the agriculture and crop input market. The company is expected to see strong demand for crop protection products in 2014. Favorable crop prices have triggered a rebound in farmer sentiment in this year's spring application season, supporting demand for crop nutrients.

However, the pricing environment is expected to remain soft in the wholesale business. Nitrogen prices may remain under pressure due to Chinese export supplies. While phosphate import is expected to improve in India (a major import market) in 2014 compared with 2013, uncertainty remains on timing and scale of import.

Agrium also faces challenges in form of transportation bottlenecks and plant outages. Harsh winter weather has challenged rail and port transportation logistics so far this year and constrained logistic capacity is expected to contribute to tight supply and demand balances within regional markets through the spring season. Moreover, the unplanned outage at the company's Carseland plant will cut nitrogen volumes and is expected to affect earnings in second-quarter 2014.

Other Stocks to Consider

Other companies in the basic materials sector worth considering are Yara International ASA ( YARIY ), Compass Minerals International Inc. ( CMP ) and PetroLogistics LP ( PDH ). While both Yara International and Compass Minerals hold a Zacks Rank #1 (Strong Buy), PetroLogistics retains a Zacks Rank #2 (Buy).


Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

AGRIUM INC (AGU): Free Stock Analysis Report

COMPASS MINERLS (CMP): Free Stock Analysis Report

PETROLOGISTICS (PDH): Free Stock Analysis Report

YARA INTL-ADR (YARIY): Get Free Report

To read this article on Zacks.com click here.

Zacks Investment Research



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Business , Stocks

Referenced Stocks: AGU , CMP , PDH , YARIY

Zacks.com

Zacks.com

More from Zacks.com:

Related Videos

Stocks

Referenced

Most Active by Volume

139,392,686
  • $5.41 ▼ 18.52%
108,086,733
  • $17.04 ▲ 1.61%
88,411,032
  • $42.085 ▼ 1.19%
35,897,863
  • $101.79 ▲ 0.21%
34,635,836
  • $46.68 ▲ 0.34%
31,162,075
  • $4.36 ▲ 12.37%
31,086,421
  • $26.21 ▲ 0.61%
30,930,862
  • $17.09 ▼ 2.95%
As of 9/18/2014, 04:15 PM

Find a Credit Card

Select a credit card product by:
Select an offer:
Search
Data Provided by BankRate.com