Fertilizer and agribusiness stocks were growing strong on Friday, overcoming what looked like a bout of profit taking the day before.
Shares of companies in the sector hit the dirt Thursday despite the fruitful first-quarter earnings that cropped up across the sector. Analysts suspected that some investors used the sector's earnings strength to pocket profits. Ultimately, good earnings prevail -- especially as analysts supported the robust results.
Potash (nyse: POT - news - people ) shares made up for Thursday's weakness gaining $13.18, or 6.8%, after losing $10.22 in the previous trading session. The stock closed $207.08 on Friday.
On Thursday, the fertilizer-and-feed-products company said first-quarter earnings nearly tripled. Potash raised its full-year earnings guidance by $150.0 million and said it would invest $4.5 billion in production improvements, enabling the company to better meet increased demand for fertilizer and animal feed (See: " Bountiful Times For Fertilizer Sector").
Credit Suisse analyst Mark Connelly suspected that rising raw material costs, compounded by Potash's meek pricing strategy compared with those of its main competitor, rattled investors.
"Hold what you own through this rough patch," Connelly advised Thursday. "While Potash may arguably be not moving as aggressively on pricing …the direction of prices is clear, the prices are moving up sharply. Global concern over food has finally become front-page news, which may end up speeding up farm commercialization in several regions of the world -- that process will lead to demand for even more fertilizer."
Connelly maintained his neutral rating on Potash and raised his target price to $210 from $157.
CF Industries (nyse: CF - news - people ) also reported nearly-tripled earnings after Thursday's closing bell. On Friday, the stock closed ahead by $6.52, or 4.7%, at $144.13, after falling $10.48 a day earlier.
Connelly said investors may have been nervous about the company's 11.0% decline in nitrogen volume and the United States Department of Agriculture's projection that 2008 will have 7.6 million fewer acres of corn crops than 2007.
But with almost 2.5 times more forward sales locked in for the rest of 2008 than a year ago, Connelly projects CF will remain profitable through the volatility.
Credit Suisse Analyst Robert Moskow sees "more positive earnings surprises to come" for Bunge (nyse: BG - news - people ), as a result of high soybean demand.
The soybean processor company's stock added $2.72, or 2.3%, on Friday, closing at $123.28.
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