Credit Suisse analysts have lowered their price target on Agrium
) to $125 from $132 a share, and also lowered their earnings
estimates for the producer of nutrients for agricultural and
"It is clear that the focus remains on improving longer-term
performance in the retail segment. While we would certainly credit
recent shareholder debates for re-focusing investors' attention on
retail operations, we believe this would have naturally occurred
this year due to its increasing profitability contribution relative
to the nitrogen segment due to passing peak fundamentals in 2012,"
said Credit Suisse.
Tweaking Estimates Due to Global Nitrogen Headwinds
"Despite AGU's nitrogen business being relatively more insulated
to global pricing headwinds, we believe that the recent precipitous
decline in pricing will likely pressure results in the second half
to a greater degree than our original forecasts. As a result we are
trimming our 2013 EPS estimate to $10.00 (from $10.25), which
mostly derives from cuts in 2H13 pricing (~75% of nitrogen pricing
is locked in for 1H). In addition we are also lowering our 2014 EPS
estimates to $10.20 (from $10.45). We are also reducing our target
price to $125 (from $132), which is based on 7.5x our normalized
NTM EBITDA estimate of ~$2.8bln."
Retail Improvements to Drive Aggregate Share Performance
"While it is clear that "Peak Ag" fears will continue to lead to
significant volatility within the fertilizer group (which at
present shows little signs of abating until post US planting), we
continue to believe that the recent decline in AGU shares
represents an attractive long-term entry point. Our view remains
predicated upon investors underappreciating the full potential to
improve operating margins in the retail segment and the subsequent
effect on the segment's profitability and equity value
contributions, particularly relative to the nitrogen segment (which
typically garners a multiple of roughly half of retail)."
Shares of AGU are up 1.83% to $92.94 in afternoon trade, and are
within a 52-week range of $74.28 - $115.31.
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