We are retaining our Outperform recommendation on leading
) following its strong second-quarter 2012 results. Adjusted
earnings of $5.43 per share topped the Zacks Consensus Estimate of
$5.36, while profit surged 20% year over year to a record level.
Revenues spiked roughly 10% year over year to roughly $6.8 billion
on the back of strong demand for all crop input products. Sales
beat the Zacks Consensus Estimate of $6.5 billion.
The company's core retail segment posted sales of $5.2 billion, a
year-over-year surge of 12%. Crop nutrient sales jumped 12% to $2.4
billion as farmers took advantage of favorable crop prices and
increased nutrient purchase. Revenues from the wholesale segment
marginally rose to $1.7 billion while sales from the Advanced
Technologies division climbed 13% to $178 million.
The company expects crop yields to be lower in 2012 owing to the
severe drought in the U.S., resulting in high grain prices. High
crop prices (especially for corn) and tight grain inventories are
expected to create huge demand for its crop nutrients.
Agrium stands to benefit from skyrocketing crop prices and overall
strong fundamentals for the agriculture and crop input market. The
company is poised to gain from the U.S. Midwest drought in the
remainder of 2012.
Moreover, Agrium follows a strategy to grow along the value chain
through a combination of acquisitions and organic development. The
acquisition of AWB has expanded the company's retail division and
provided access to the growing Southeast Asia market.
Agrium recently said that it has no plans of splitting its retail
operation. The company also noted that it will continue pursuing
its business strategy of generating strong results while boosting
We expect strong global demand for fertilizers and seeds to boost
Agrium's results in 2012. However, the global macroeconomic
situation presents some risks that can potentially impact
Agrium, which competes with
CF Industries Holdings Inc.
Potash Corp. of Saskatchewan Inc.
), maintains a Zacks #2 Rank, implying a short-term (1 to 3 months)
AGRIUM INC (AGU): Free Stock Analysis Report
CF INDUS HLDGS (CF): Free Stock Analysis Report
POTASH SASK (POT): Free Stock Analysis Report
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