On March 19, Zacks Investment Research downgraded fertilizer
Potash Corp. of Saskatchewan, Inc.
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Potash Corp. posted tepid fourth-quarter 2013 results on Jan 30.
Its profit for the quarter slid roughly 45% year over year, hurt
by severance-related charges and lower pricing across all three
nutrients - potash, nitrogen and phosphate.
Adjusted earnings of 31 cents per share fell short of the Zacks
Consensus Estimate by a couple of cents. Revenues fell roughly 6%
year over year to $1,541 million, but surpassed the Zacks
Consensus Estimate of $1,388 million. Revenues fell as higher
sales volume was more than neutralized by lower pricing.
Earnings estimates for Potash Corp. are on the downswing
following the release of the fourth quarter results. The Zacks
Consensus Estimate for 2014 has gone down 20.5% to $1.63 per
share as most of the estimates were revised downward. The Zacks
Consensus Estimate for 2015 has also declined 10.3% to $2.00.
While Potash Corp. will benefit from strong geographic
diversification and expanded operational capability in potash, it
remains exposed to volatility in potash and phosphate pricing.
Average realized potash price fell roughly 27% year over year in
the fourth quarter, hit by competitive pressure across all
markets. Pricing pressure was also witnessed across Nitrogen and
Phosphate segments. These challenges may sustain in the near
Moreover, demand for potash and phosphate remains somewhat weak
in India, a key market. Indian government's move to trim potash
subsidy levels coupled with local currency devaluation is
affecting demand in that country. A material recovery in demand
is not expected in the short term.
Other Stocks to Consider
Other companies in the broader basic materials sector with
favorable Zacks Rank are
Cytec Industries Inc.
The Dow Chemical Company
), all with a Zacks Rank #2 (Buy).
CYTEC INDS INC (CYT): Free Stock Analysis
DOW CHEMICAL (DOW): Free Stock Analysis
METHANEX CORP (MEOH): Free Stock Analysis
POTASH SASK (POT): Free Stock Analysis Report
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