Potash Corp (POT) just blew away many forecasts with a net profit of $1.61 a share and the promise of even better results ahead. This and other developments will move the stock.
Potash is so confident in the fertilizer markets that the company is going to double its quarterly dividend and split its stock 3 for 1 down the road. This latter development is not necessarily going to be any kind of fundamental driver, but it does provide another show of strength.
For 2011, POT expects earnings to climb 13% for the full year to crack the $8.40 to $9.60 range. That is a fairly wide band of possibilities — and as yet, Wall Street still expects the final numbers to come in roughly in the center at $8.98.
Just in the first quarter, the company is comfortable with forecasts of $2.10 to $2.70 a share. Except at the very low end of the range, this number is well above consensus and again, will probably move the stock as the analysts catch up.
China has negotiated to buy 600,000 tons of potash over the next five months for $400 a ton. This represents a 14% increase over last year and may be the first glimpse of a whole new world for fertilizer.
Some traders groused that the deal gave China a way to get a slight discount on current potash prices and so remove a lot of the demand upside from this increasingly precious agricultural commodity and its producers.
The global potash cartel continues to get smaller, which should translate into higher prices throughout the fertilizer group down the road.
Although the $8.2 billion merger of Russia’s Uralkali (URALY.PK) and Silvinit is both long anticipated by investors and difficult to trade directly in the United States, the ramifications for Western companies like PotashCorp (POT) are still bullish.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.