Agrium Inc. (AGU) is struggling as fertilizer prices remain weak. This Zacks Rank #5 (Strong Sell) is expected to see declining earnings again in 2016.
Agrium produces all three major fertilizers, including nitrogen, phosphates and potash. It is also a retail supplier of agricultural products such as crop protection and seeds in North America, South America and Australia.
It's headquartered in Calgary.
A Fourth Quarter Beat
On Feb 9, Agrium reported its fourth quarter results and beat the Zacks Consensus by $0.03. Earnings were $1.43 compared to the Zacks Consensus of $1.40.
It was the second highest fourth quarter results on record, boosted by strong wholesale performance.
But continued falling fertilizer prices are hurting even though the retail side of the business provides some cushion.
Still, in 2015, the company generated $8.59 per share of free cash flow. It pays a healthy dividend of $3.50 per share, which is yielding 4.2%.
Analysts Gloomy About 2016
In February, the company gave a broad earnings guidance range for 2016 of $5.50 to $7.00.
Analysts have grown gloomier since then and have been lowering estimates.
3 estimates were lowered for 2016 in the last week with 2 lowered for 2017 in that time.
The Zacks Consensus Estimate has plunged to just $6.09 from $7.51 three months ago. $6.09 is still within the company's February guidance range, but it is edging towards the lower end of that range now.
Agrium is expected to see an earnings decline of 12.8% this year.
Are Shares Cheap?
Shares have been bouncing around the 52-week lows for most of 2016.
Still, because earnings are declining, the shares aren't dirt cheap. They trade with a forward P/E of 14.3.
Because of falling fertilizer prices, the entire industry is challenged right now so most of the fertilizer companies are Zacks Rank #4 (Sell) or #5 (Strong Sell) stocks.
But if you want to invest in an area that is similar, you might want to consider Scotts Miracle-Gro (SMG). It's a Zacks Rank #2 (Buy) and you also get a nice dividend, currently yielding 2.6%.
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Tracey Ryniec is the Value Stock Strategist for Zacks.com. She is also the Editor of the Insider Trader and Value Investor services. You can follow her on twitter at @TraceyRyniec and she also hosts the Zacks Market Edge Podcast on iTunes.
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