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- I expect Potash Corp. to get the lion's share of the potash supply opening up due to the Uralkali Solikamsk-2 (S-2) potash mine evacuation last week.
- I do not expect the S-2 mine to be reopened quickly as government regulators assess the risks. The mine operator is backfilling the western part of the mine (abandonment).
- I expect Potash Corp. to earn an additional 29.4 cents in 2015 EPS due to these sales, leading to a stock price increase of $4.76 US to $38.55 US.
Uralkali Mine Shutdown Means N.A. Potash Producers Could Benefit
- Today JSC Uralkali disclosed its Solikamsk-2 (S2) potash mine experienced high brine flooding levels and the mine was evacuated.
- Potential impacts from the cessation of ore removal at the 2.3 million metric ton per year S2 mine caused North American potash stocks to rally this morning.
- POT, MOS, AGU rallied due to a possible longer term interruption and reduction in Uralkali operable potash capacity. Canpotex would be a beneficiary.
- Intrepid Potash was recommended to our subscribers recently and would be a likely beneficiary of more soybeans planted in the US next Spring, in addition to today's events.
Potash Corporation - Attractive Dividend Hides An Overpriced Stock
- Potash Corporation yields more than 4% and has become a popular stock within the materials sector for income seeking investors.
- However, the highly volatile price of the underlying commodity makes Potash Corporation a relatively cyclical stock and has caused the firm's payout ratio to rise significantly in recent quarters.
- Trading at a premium price to earnings multiple with only modest earnings growth expected over the coming years, Potash shares appear significantly overvalued at their current price.
Potash Corporation Of Saskatchewan Inc.: Analysis Of Earnings Miss
- The crop pricing environment has been fairly week this year and potash prices have still to come back to their pre-Uralkali announcement days of June 2013. However, POT expects stable potash demand in 2015.
- The earnings missed expectations, but due largely to unusual taxes.
- The focus though, would be on expected capital structure, given that their $8.3 billion decade long investment plan would soon draw to a close, generating significant free cash flow.
- How that cash would be used – dividends or inorganic growth, remains to be seen.
Update: Potash Corp Market Fundamentals Remain Challenged
- Potash Corp provided downbeat market commentary at investor conferences.
- The stock remains overpriced for the fundamental shift in the key potash market.
- The original research continues to anticipate a weak pricing environment for potash keeping a lid on the stock going forward.
- Upcoming seasonal pressure and an end to share repurchases have hindered Potash's shares. We remain bullish on the long-term outlook and see the lower $30s as an excellent entry price.
- POT's balance sheet is rock solid and leverage is low. An improving cost structure and lower capital expenditures will insure adequate cash flow for dividends and potential buybacks.
- While concerns around supply and demand remain, we believe POT can flourish in a low-price environment providing a solid dividend and growth investment.
- Potash Corp. currently trades at $35.
- The potash company has substantially rebounded after the sector meltdown last year and actually returned to pre-crisis levels in June 2014.
- Excellent long-term fundamentals and a dip back to the $35 region make Potash Corp. a Strong Buy once again.
- Potash Corp generally exceeded Q214 estimates based on strong cost controls.
- The potash market to remain under pressure even if new growth targets are hit.
- Investors should consider the recent rebound in Potash Corp a gift that is contrary to the long-term fundamentals in the main fertilizer.
- With POT reporting better than expected results, Jochen Tilk could not have asked for a better start as the new CEO.
- However, strong result does not mean POT does not face any headwinds, in fact the company’s challenges are far from over.
- With POT trading at 18.7 of the high end of 2014 EPS guidance, I do not think that the current risk/reward is compelling at these levels.
Is Potash Corp. Expected To Remain Under Pressure?
- Potash Corporation disappointed investors with its second quarter earnings results.
- A significant decline was witnessed in the company’s revenues, net profits growth and deteriorating margins mainly due to lower average product prices.
- The company’s retained earnings and operating and free cash flows were also affected by lower net earnings.
- Potash’s management expects a strong order book in the second half of 2014.
Potash Corp. Q2 EPS Clears Low Bar, Year Over Year Sales And Earnings Lower
- Potash sales flat year over year on falling prices.
- Gross margins in phosphate business fall to single digits.
- Nitrogen business strong on growth in ammonia and ammonium nitrate sales volumes.
Potash Corp. Continues Pricing Strategy And Enters Period Of Lower Growth
- How elastic is potash demand to changes in price?
- What role do sometimes volatile crop prices play in fertilizer pricing?
- What do changes in the company's dividend policy over the last 3 years signal to investors?
- We think stocks that are cheap (undervalued) and just starting to go up (momentum) are some of the best ones to evaluate for addition to the portfolios.
- We liken stock selection to a beauty contest. In order to pick the winner of a beauty contest, one must know the preferences of the judges of a beauty contest.
- Potash boasts a Valuentum Buying Index score of 6, reflecting our "fairly valued" DCF assessment of the firm, its neutral relative valuation versus peers, and bullish technicals.
Growing Capacity And Further Price Decline Are The Main Threats For Potash Miners
- Share prices of potash miners fell sharply last summer after Uralkali announced that it will step out of the BPC export cartel.
- The profitability of Potash Corp. and Mosaic Co. heavily relies on the potash price.
- Capacity expansions and global oversupply in the next years make a recovery of potash prices unlikely.
Potash Corp.: A Textbook Example That Contrarian Investing Works
- Potash Corp. is a perfect example that contrarian investing is a successful investing approach.
- Rebound in fertilizer stocks is ongoing, and has not come to an end yet.
- There is nothing wrong with getting rich slowly.
- Due to growing population, global food demand will increase.
- Fertilizers' demand is expected to increase.
- Potash prices are expected to increase, and that will help POT to improve its profitability.
- Attractive for dividend investors.
Yesterday, 12:11 PM
- Potash producers Agrium (AGU -2.6%), Potash Corp. (POT -0.3%), Mosaic (MOS -0.2%), CF Industries (CF -1.3%) and Intrepid Potash (IPI -1.1%) continue to give back the gains that followed Uralkali’s mine suspension, and BofA Merrill's downgrade of AGU hasn't helped.
- While BofA remains positive on earnings from nitrogen, it believes potash is oversupplied and global demand growth could regress from 2014's ~11% pace.
- But Stifel analysts are not throwing in the towel on the potash producers, citing potash supply constraints from declining North American producer inventories as well as the potential for the permanent closure of the Russian mine offsetting the negative impact of potentially lower North American planted corn acreage.
Mon, Nov. 24, 7:45 AM
- Uralkali (OTC:URALL) is preparing to restart operations at half of its potash mine in Russia where work was halted last week after an accident, CEO Dmitry Osipov says.
- The governor of the Perm region where the Solikamsk-2 mine is located says the inflow of water at the mine had "practically stopped" and there is no danger to residents of the area, where a large sinkhole has formed.
- POT -2.6% premarket; also watch MOS, AGU, IPI.
Wed, Nov. 19, 3:58 PM
- Potash (POT +1.2%) is upgraded to Outperform from Market Perform with a $40 price target, up from $38.50, at Raymond James after troubles at a mine owned by Russia’s Uralkali forced its closure; in the event Uralkali’s capacity remains handicapped, the firm thinks POT could benefit from a tighter potash market.
- Fertilizer peer Mosaic (MOS +1.7%) is upgraded to Positive by Susquehanna, which believes its potash operating leverage is underappreciated by investors, as the shares went up less than POT yesterday in response to the Uralkali news even as MOS has more relative earnings leverage to an improvement in potash prices than POT.
- Earlier: CF Industries upgraded at Credit Suisse, which sees better industry position
Wed, Nov. 19, 9:55 AM
- A sinkhole is found near Uralkali's (OTC:URALL) Solikamsk-2 potash mine in Russia, where work was suspended yesterday after a water inflow.
- Uralkali does not know how seriously the mine at Solikamsk-2, which accounts for 20% of the company's capacity, would be affected, but a water inflow and resulting sinkhole in 2006 shut another Uralkali mine in the same region permanently.
- North American potash producer shares jumped 2%-5% yesterday, and are up early again today: POT +2.5%, MOS +2.4%, AGU +0.7%, IPI +2.3%.
Tue, Nov. 18, 11:25 AM
- Uralkali (OTC:URALL) shares fell by the most in a year after the potash miner suspended operations and evacuated workers from a potash mine in Russia’s Perm region because of an increase in brine inflow.
- The world’s biggest potash producer says it is monitoring the situation at the Solikamsk-2 mine, while its four other mines continue to operate normally.
- Uralkali's misfortune is sparking gains in North American potash producers: POT +5.1%, MOS +3.4%, AGU +3.4%, IPI +5%.
Wed, Nov. 12, 5:33 PM| Comment!
Tue, Nov. 11, 7:17 PM
- Capital Group disclosed in a filing this week that it has increased its stake in Potash Corp. (NYSE:POT) to 83.1M shares, or just above 10% of the total and nearly double the shares of any other single investor.
- “We don’t know whether Capital Group is averaging down their cost of [POT shares] or adding to their position because of Jochen Tilk’s new role, but regardless this should be positive for the stock,” AltaCorp Capital says.
- Capital Group is raising its stake in POT at a time when many investors expect the company will raise its dividend or buy back stock.
Thu, Oct. 23, 9:14 AM
- Potash Corp. (NYSE:POT) +1.2% premarket after reporting an 11% drop in Q3 earnings and missed analyst estimates, but the results were within the company's prior guidance.
- POT says it sold 2M metric tons of potash in Q3, up 29% Y/Y, but its average realized price was US$281/ton vs. US$307 in Q3 2013.
- Says global potash shipments reached an all-time high in the first nine months of 2014 amid rising prices, and nitrogen and phosphate prices also have improved as demand has been strong.
- Increases its estimate for potash annual sales volumes to 9M-9.2M metric tons; sees 2014 worldwide potash sales of 58M-60M tons, above its prior guidance.
- Issues in-line FY 2014 EPS guidance, seeing $1.75-$1.85 from prior $1.70-$1.90 vs. $1.82 analyst consensus estimate.
Thu, Oct. 23, 6:08 AM
Thu, Oct. 16, 2:14 PM
- Ten of 12 U.S. farm retail companies surveyed by Reuters say fertilizer sales this autumn are lower than they were last year, as farmers respond to a drop in crop prices to multi-year lows and a delayed harvest.
- Reductions in fertilizer use of an estimated 10%-50% by volume could hit profits of producers such as Potash Corp. (POT -1.1%) and Mosaic (MOS -0.7%) since U.S. buyers typically pay a premium for some fertilizers such as potash.
- Some U.S. dealers say there is still time for fertilizer sales to recover to last year's levels once farmers complete the harvest, but others fear a slump that could stretch into 2015 as low crop prices push purchases out of reach.
Thu, Oct. 2, 2:59 PM
- Fertilizer producers are mostly lower after Agrium (AGU -1.9%) announced weak guidance for H2 of its FY 2014: POT -2%, MOS -0.9%, OTCPK:YARIY -2.8%, IPI -2.3%, RNF -1.2%, but CF +2.4%.
- Canaccord and Piper Jaffray downwardly revised their 12-month price targets for the stock, by a respective 1.9% to $102 while reiterating a Buy rating and by 4.2% to $92 while maintaining a Neutral rating; however, BMO and RBC each reiterated their Outperform ratings on the stock with respective target prices of $99 and $115.
- Jim Cramer thinks AGU's woes could reverberate throughout the ag sector, at least in the near-term, with selling possibly spread to the likes of Monsanto (MON -0.4%), Syngenta (SYT +0.1%), Deere (DE +0.1%) and Agco (AGCO +1%).
Wed, Oct. 1, 5:28 PM
- Agrium (NYSE:AGU) -4.5% AH after saying it expects Q3 EPS from continuing operations of $0.45-$0.55, below analyst consensus estimate of $0.74, and Q4 EPS from continuing operations to be similar to results from the year-ago Q4 adjusted EPS of $0.72, also below consensus of $1.03.
- AGU expects the EBITDA contribution from its wholesale operations in H2 2014 to be similar to last year's results, and H2 retail EBITDA is anticipated to be in-line with the record EBITDA achieved in the same period last year.
- Other fertilizer companies also are lower AH: POT -2.4%, MOS -1%, CF -0.3%.
Tue, Sep. 30, 9:40 AM
- Mosaic (MOS -2.1%) opens lower after saying it is reducing phosphate fertilizer production because of high sulfur and ammonia prices.
- MOS says the curtailment will result in lower operating rates at its mines and concentrates plants but does not expect any employee layoffs.
- MOS also says it expects Q3 potash and phosphate sales volumes to be at or near the lower end of previous guidance, due to weather-driven production outages in potash and by timing of shipments in phosphates; prices are expected to remain near the middle of guidance.
- POT -1.1%, AGU -0.9%, CF -0.2%, RNF -0.8%, RTK -1.7%.
Tue, Sep. 23, 3:36 PM
- Canadian fertilizer makers Agrium (AGU +2.4%) and Potash (POT +0.2%) say they are bracing for a pullback in demand from U.S. farmers due to sliding crop prices, but that any slump is unlikely to be severe.
- Agrium CEO Chuck Magro tells an investor conference that he expects record U.S. yields should support relatively strong fertilizer applications in Q4 2014 and H1 2015, but "near-perfect weather" already has limited sales of chemicals that protect crops from disease and insects.
- Potash CFO Wayne Brownlee says he assumes some reduction in U.S. potash use after this year's harvest, but notes that the crop nutrient makes up only ~3.5% of a farmer's total costs.
- Investor presentations: AGU, POT.
Wed, Sep. 17, 3:41 PM
- Potash Corp. (POT +0.5%) may boost its production capacity to as much as 11M metric tons of potash next year from ~9.2M tons this year on signs that demand for the crop nutrient may rise, CFO Wayne Brownlee says today in an investor presentation.
- "Given some of the supply constraints we’ve seen in some of our competitors, there may be room for us to have increased volume," the CFO says.
- Brownlee estimates global potash sales will total 58M-59M tons this year, with the same range or possibly increasing slightly in 2015.
Tue, Sep. 16, 5:55 PM
- The CEO of Russian potash firm Uralkali (OTC:URALL) says it has no plans to return to the sales arrangement it had with Belarus, WSJ reports.
- Share prices of major potash producers in North America, Germany and Israel have rallied this year, partly on hopes of a reconciliation, but Uralkali CEO Dmitry Osipov says no talks have been held since April and none are planned.
- However, potash prices have not fallen as much as some analysts had predicted following the breakup, due in part to better than anticipated demand from Brazil and China.
- On watch: POT, MOS, AGU.
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