On Nov 25, we reaffirmed our Underperform rating on leading
Potash Corp. of Saskatchewan, Inc.
) following its lackluster third-quarter 2013 results. Our view
reflects the weak price environment and a still challenging
demand scenario in India.
Profit for the third quarter, reported on Oct 24, slid roughly
45% year over year, hurt by lower pricing across all three
nutrients. Revenues fell by double digits on lower potash volume.
Earnings matched the Zacks Consensus Estimate while sales missed.
Potash Corp. cut its earnings forecast for the full year taking
into account the soft pricing environment.
Estimates for Potash Corp., a Zacks Rank #4 (Sell) stock, are on
the downswing following the release of the third quarter results.
The Zacks Consensus Estimate for 2013 has gone down roughly 12%
to $2.13 per share as all estimates were revised downward. On a
similar note, the Zacks Consensus Estimate for 2014 declined
roughly 13% to $2.11.
While Potash Corp. will benefit from strong geographic
diversification and expanded operational capability in potash, it
is exposed to macroeconomic uncertainties and price volatility.
Average realized potash price fell roughly 28% year over year in
the third quarter on competitive pressure and cautious buyer
behavior. Pricing pressure was also witnessed across nitrogen and
Potash Corp. is also seeing somewhat weak potash demand in India,
a key market. Indian government's move to trim potash subsidy
levels coupled with higher retail pricing and local currency
devaluation resulted in lower demand in the country. These
challenges may sustain through the balance of 2013.
We also account for the uncertainty in the potash market
following the exit of world's largest potash maker Uralkali Group
from one of the biggest potash cartels - the Belarus Potash
Other Stocks to Consider
While we prefer to avoid Potash Corp., other companies in the
fertilizer and related industries with favorable Zacks Rank are
The Scotts Miracle-Gro Company
The Andersons, Inc.
). All of them retain a Zacks Rank #2 (Buy).
ANDERSONS INC (ANDE): Free Stock Analysis
POTASH SASK (POT): Free Stock Analysis Report
SCOTTS MIRCL-GR (SMG): Free Stock Analysis
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