On Nov 8, Zacks Investment Research downgraded fertilizer
Potash Corp of Saskatchewan Inc.
) to a Zacks Rank #5 (Strong Sell).
Why the Downgrade?
Potash Corp.'s earnings of 41 cents per share for the third
quarter of 2013, reported on Oct 24, were down 44.6% from 74
cents reported a year ago. Earnings also fell short of the
company guidance range of 45 cents-60 cents per share. The
results, however, were in line with the Zacks Consensus
Potash Corp. posted a profit of $356 million in the reported
quarter, down roughly 45% from $645 million recorded in the
prior-quarter. The decline was mainly attributed to weaker prices
for all three nutrients - potash, nitrogen and phosphate - and
lower potash sales volumes.
Sales came in at $1,520 million in the quarter, decreasing 29%
from $2,143 million registered a year ago. It missed the Zacks
Consensus Estimate of $1,552 million. The reduced sales were
primarily due to lower-than-expected potash sales volumes in the
quarter-end as buyers delayed purchases owing to near-term market
The market for all three nutrients-potash, nitrogen and
phosphate remained challenging in the third quarter and weighed
on the long-term fundamentals of the company. Potash Corp.
suffered when Russian firm Uralkali left the potash cartel
(Belarusian Potash Company) and announced that it would aim to
boost market share, leaving buyers anticipating weaker
Potash Corp. also faces challenges in India, a key market.
Although contracts with major suppliers run through Mar 2014,
weak domestic demand due to reduced government subsidies and
currency weakness could result in lower shipments and price
Following the third-quarter earnings release, the Zacks
Consensus Estimate for 2013 for Potash Corp. dropped 12.7% to
$2.13 per share. Similarly, the Zacks Consensus Estimate for 2014
has decreased 12.8% to $2.11 per share.
Other Stocks to Consider
Other companies in the basic materials sector with favorable
Zacks Rank are
The Scotts Miracle-Gro Co.
). While Methanex carries a Zacks Rank #1 (Strong Buy), Scotts
Miracle-Gro and BASF hold a Zacks Rank #2 (Buy).
BASF SE (BASFY): Get Free Report
METHANEX CORP (MEOH): Free Stock Analysis
POTASH SASK (POT): Free Stock Analysis Report
SCOTTS MIRCL-GR (SMG): Free Stock Analysis
To read this article on Zacks.com click here.