Shares of fertilizer maker�Agrium (AGU) are off 2 cents at $59.62 after TD Newcrest analyst Paul D’Amico raised his rating on the stock to “Buy” from “Hold” while simultaneously lowering his price target to $72 from $74.
Agrium yesterday reported Q1 revenue below expectations and a net loss where analysts were forecasting profit.
Agrium’s profit or loss is “messy,” D’Amico notes, with hedging losses and stock-based compensation items, and a 17-cent-per-share tax “recovery.” However, he regards the pro-forma number of 41 cents as generally beating the consensus 33-cent estimate.
However, the important thing for D’Amico is that weakness in the retail segment of fertilizer sales was because of inventory overhang in fungicides that brought down margin in that segment. That is being worked off, giving him greater confidence Agrium will meet his Q2 EPS estimate of $2.79.
D’Amico lowered his EPS estimate for this year to $4.04, from $4.87, but most of that is to reflect the reported dip in profit in Q1.
He thinks the stock is still a better buy than Potash (POT), trading at just 6 times his projected Ebitda next year, versus 9.8 times for Potash.
That discount should narrow overtime as investors come to view the relative “diversity” in Agrium’s business, D’Amico writes.
His price target goes down due to higher net debt forecasted next year.
Potash, meanwhile, is the favored by the broader market today, rising $1.54, or 1.5%, to $103.68.
Correction: A previous version of this post mistakenly referenced “Q1″ in D’Amico’s forecast for quarterly earnings. In fact, he was referring to Q2′s forecast. My apologies for the error.
No comments:
Post a Comment