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Potash Corp (T.POT) up 35%, time to rotate into Agrium (T.AGU), Monsanto (MON)?

Stockhouse Editorial
0 Comments| May 1, 2014


The following is an excerpt from Canaccord Genuity’s Morning Coffee newsletter.

Shares of Potash Corp. (TSX: T.POT, Stock Forum) have steadily moved higher (up more than 35%) since touching its August 2013 lows of $29.07 per common share.

Despite a steady onslaught of negative potash headlines, and analyst calls, shares of Potash Corp. are now back to levels prior to where Uralkali (the world’s largest potash supplier) sank the potash market by announcing that it will no longer be a member of the Belarusian Potash Company.

Last week, Potash Corp reported adjusted Q1/14 earnings per share of US$0.38 (adjusted for a special dividend and a non-cash impairment charg) versus Canaccord Genuity AG Analyst Keith Carpenter’s estimate of US$0.32, consensus of US$0.35 and the company’s guidance of US$0.30-0.35.

Potash and nitrogen gross margins were better than expected, while the phosphate segment fell below Carpenter’s estimate. Higher operating expenses (SG&A and provincial mining and other taxes) were mostly offset by higher other income (adjusted for a one-time item).

2014 earnings per share guidance was increased mildly to US$1.50-1.80 versus the prior range of US$1.40-1.80, Carpenter’s estimate of US$1.70 and consensus of US$1.65.

Within the potash segment, sales volume guidance was improved to 8.3-8.7 tonnes, versus 8.2-8.6 tonnes previously from Carpenter’s forecast of 8.4 tonnes.

Carpenter continues to believe potash equity valuations are stretched (investors should rotate into Agrium Inc. (TSX: T.AGU, Stock Forum) and Monsanto Co. (NYSE: MON, Stock Forum) based on valuation).

Potash shares rose 0.33% to $39.75 Thursday, leaving a market cap of $33.6 billion, based on 845.7 million shares outstanding. The 52-week range is $14.13 and $29.67.

Agrium eased 0.58% to $104.66, leaving a market cap of $15 billion, based on 143.7 million shares outstanding. The 52-week range is $108.28 and $83.46.

Monsanto was off 0.25% to $110.42, leaving a market cap of $57.9 billion, based on 524.2 million shares outstanding. The 52-week range is $117.50 and $94.


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