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CMP: Buy On Weakness; Outlook Is Highly Conservative

|Includes:Compass Minerals International, Inc. (CMP)

CMP stock is down in early trading, likely the result of what should be viewed as highly conservative guidance for 1Q14 Salt. Fertilizer results and the outlook appear positive. As such, the current pricing weakness appears to be a nice buying opportunity, as the company has set itself up for a 1Q14 earning beat. Call is at 10am. ET.

Specifically, the company estimates 1Q highway salt volumes of 4.4 million tons, implying just 1% yoy growth. For Consumer and Industrial, the company is targeting just 5% yoy volume growth for 1Q14. While 4Q volumes in this business are typically weaker than 1Q volumes, this too looks to be a conservative estimate. ASP for highway deicing product is expected to be down 5% sequentially on lower contract prices. Although this has to be viewed negatively, it should also represent the last quarter of price weakness, as the supply/demand balance for salt going forward is likely to favor pricing strength.

4Q13 results were mostly in-line. In Salt, we already knew the highway deicing volumes would be strong. However, the Consumer and Industrial volumes of 740 k tons in 4Q13, although up 39.6% yoy, were shy of my estimate, as it represented only 15.5% of total salt volumes. Typically, this higher margin product represents 18%-20% of 4Q salt volumes. On pricing, Highway salt averaged $52.20, down just slightly from $52.56 in the year ago period. This was more likely on favorable mix, as the company sold my highway product in the quarter versus lower priced salt to the chemical end market. Consumer and Industrial average price of $151.86, up from $150.95 in the year ago period was in-line with expectations.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Stocks: CMP