We are retaining our Neutral stance on world's largest
of Saskatchewan Inc.
). The Canada-based company posted tepid first-quarter 2012 results
with both revenues and earnings missing the Zacks Consensus
Estimates. Revenues and profit slid year-over-year, bogged down by
lower sales of potash due to weak demand.
Potash Corp. faced challenges associated with deferral of
fertilizer purchases by its customers in the quarter. The company
sniped its earnings target for 2012 to $3.20 to $3.60 per share
from its previous forecast of $3.40 to $4.00.
Potash Corp. has a competitive advantage stemming from its
mining rights to the world's largest potash reserve. The company
has a strong geographic diversification and continues to invest in
expanding its operational capability in potash.
While there is uncertainty surrounding the U.S. economy and the
sovereign debt crisis in Europe, the strain on the world's food
supply is driving strong demand for all three nutrients of the
company, especially potash.
Given the tight potash supply in North America, Latin America
and spot markets in Asia, the demand for potash is expected to rise
as buyers are now seeking to secure the product. Potash Corp.
expects this trend to continue in 2012.
With more than half of the world's estimated new supply coming
from its projects between now and 2015, the company believes that
it can capture a significant share of demand growth over the next
While demand for potash is expected to strengthen over the
course of 2012, shipments are expected to be sluggish moving ahead.
The company is also exposed to macroeconomic uncertainties and
other issues such as price volatility and currency exchange
While need for potash is significant in major developing
economies like China and India in the long run, a few short-term
challenges across these markets may impact the near-term demand for
fertilizers. The Indian government's move to trim potash subsidy
levels coupled with higher retail pricing resulted in lower demand
in that country. As a result, the company has scaled back its
potash demand outlook for India for this year.
Potash Corp., which competes with
), currently retains a Zacks #3 Rank, which translates into a
short-term (1 to 3 months) Hold rating.
BASF SE (BASFY): Free Stock Analysis Report
MOSAIC CO/THE (MOS): Free Stock Analysis Report
POTASH SASK (POT): Free Stock Analysis Report
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