Potash Corp Slightly Lower as UBS Analyzes Q1 Result
UBS has kept a Buy rating and US$66 12-month price target on Potash Corp (POT.TO) after it reported adjusted Q1 EPS of $0.84, vs UBS at $0.82 and consensus of $0.80.
"Results were positively impacted by strong demand and improved prices for all three nutrients as well as solid contributions from PotashCorp's strategic investments. We note these investments are currently worth ~$12 per PotashCorp share. The company also noted they achieved record first quarter gross margin of $1.1 billion."
2011 guidance was increased:
"Management raised its 2011 EPS guidance from $2.80-3.20 to $3.00-3.40 with EPS of $0.70-0.90 expected in Q2. We note consensus estimates were already within the updated guidance ranges. In potash, POT.TO increased its 2011 gross margin guidance from $2.5-2.8bln to $2.7-2.9bln and narrowed the range of potash shipment guidance from 9.5-10.0M mt to 9.6-10.0M mt. Total phosphate and nitrogen gross margin guidance for the year was also increased from $1.0-1.2bln to $1.1-1.3bln."
Potash Corp is continuing to forecast global potash demand of 55-60M mt in 2011: "With estimated global potash capacity of 61M mt, the market should be relatively tight, and as a swing producer, PCS results should continue to benefit from this tightness."
Valuation: no change to $66 price target and Buy rating:
"We have made minor revisions to our EPS estimates to reflect the company's updated guidance. Our $66 price target is based upon our SOTP analysis utilizing N, P, and K multiples of 7x, 7x, and 11.5x our weighted 2011 and 2012 segment EBITDA, and adding the value of investments ($12/shr)."
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