We issued an updated research report on fertilizer company Potash Corporation of Saskatchewan Inc. POT on Nov 23.
Potash Corp. recorded earnings of $53 million or 6 cents per share in third-quarter 2017, down from $81 million or 10 cents it earned a year ago. Barring one-time items, adjusted earnings were at 9 cents per share for the third quarter, which missed the Zacks Consensus Estimate of 12 cents.
Potash Corp.'s adjusted net sales were $1,062 million that beat the Zacks Consensus Estimate of $1,011 million.
Potash Corp.’s shares have moved up 13% in the last three months, underperforming the industry’s 16.3% growth.
Potash Corp., during third-quarter earnings call, said that expects strong customer engagement in all key potash markets and strong demand to continue into 2018.
For 2017, the company anticipates global shipment at 62-65 million tons, with total shipments in North America to approach higher end of 9.3-9.8 million tons range.
The company expects nitrogen market to remain volatile in the fourth quarter and market fundamentals are likely to remain challenging for phosphates.
Potash Corp. also narrowed the full year earnings expectations to the range of 48-54 cents per share, which includes merger related charges of 8 cents per share. The company has revised total potash sales volume guidance and now expects sales in the range of 9.1-9.3 million tons (narrowed from 9-9.4 million tons) in 2017. It projects potash gross margin of $750-$800 million for the year.
Potash Corp. saw healthy demand for potash in the most recent quarter and expects consistent customer engagement through the balance of 2017, supported by healthy consumption trends. The company sees strong consumption in China driven by shift to more potassium-intensive crops like vegetables and fruits.
Potash Corp. and Agrium have agreed to combine their businesses to create a fertilizer giant with a pro forma enterprise value of $36 billion. The companies have obtained regulatory approval in China, Canada, Russia, India and Brazil for the deal that is expected to close by the end of fourth-quarter 2017. The integrated company is expected to generate as much as $500 million of annual operating synergies.
However, the company remains exposed to a weak pricing environment. Higher supply and weak agricultural fundamentals have contributed to a softer nitrogen pricing environment. Weak pricing also continue to hurt profitability in the company’s phosphate business which is expected to continue through 2017.