We are downgrading our recommendation on leading fertilizer
) to Neutral factoring in its weak fourth quarter outlook. The
company posted tepid third-quarter 2012 results with adjusted
earnings of $1.11 per share trailing the Zacks Consensus Estimate
of $1.81. Its profit slid 56% year over year on weak potash
AGRIUM INC (AGU): Free Stock Analysis Report
CF INDUS HLDGS (CF): Free Stock Analysis
POTASH SASK (POT): Free Stock Analysis Report
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Revenues fell roughly 6% year over year to $2,962 million, also
falling behind the Zacks Consensus Estimate of $3,094 million.
The company saw lower sales across its Retail and Wholesale
segments in the quarter.
Retail sales dipped 9% as early harvest and severe drought
conditions in the U.S. hurt demand for some crop inputs products.
Wholesale segment revenues declined 3% due to the downtime at the
company's Vanscoy potash facility.
Agrium stands to gain from rising crop prices and overall strong
fundamentals for the agriculture and crop input market. The
company follows a strategy to grow along the value chain through
a combination of acquisitions and organic development.
The acquisition of AWB has expanded Agrium's Retail division and
provided access to the growing Southeast Asia market. Moreover,
the acquisition of Viterra's agri-products business is expected
to support its earnings in 2013.
The company expects high crop prices and tight grain inventories
to create higher demand for its nutrients. It envisions strong
demand for top quality seeds in the 2013 growing season. Agrium
is also expected to benefit from healthy demand for urea in India
However, weak overseas potash demand stemming from the
uncertainty associated with new supply contracts with China and
India is impacting pricing for the nutrient and is expected to
significantly affect overseas shipment volumes in the fourth
Results in the fourth quarter are expected to be lower compared
with the year-ago quarter as the company anticipates a
significant decline in international potash demand and lower
ammonia sales in Western Canada due to unfavorable weather
conditions. Moreover, global phosphate market is expected to
remain weak in the near term, partly due to lower demand from
Agrium, which competes with
CF Industries Holdings Inc.
Potash Corp. of Saskatchewan Inc.
), retains a short-term (1 to 3 months) Zacks #3 Rank (Hold).