The global commodities boom has meant impressive growth for fertilizer companies and this is only slated to continue, according to a spate of industry-wide price target raises.
RBC Capital Markets Analyst Fai Lee raised targets for Agrium (nyse: AGU - news - people ) and Potash (nyse: POT - news - people ), citing expectations that strong industry fundamentals would continue through 2014. Agrium shares closed Friday's session ahead by 26 cents, or 0.2%, at $108.68 and Potash's stock, after hitting a session high of $237.08, slipped by $2.92, or 1.3%, to close Friday's session at $230.09.
"The extremely strong crop price environment should translate into continued robust demand for fertilizers. We expect potash fertilizer market fundamentals to remain strong through 2014 given limited new capacity additions and growing demand," Lee said (See: Bountiful Times For Fertilizer Sector).
Lee hiked Agrium's price target to $140 from $115 and raised upcoming earnings estimates to $8.31 from $7.06 a share in 2008 and to $10.91 from $8.43 in 2009. Potash's price target was raised to $340 from $300. Lee pushed earnings estimates to $12.26 from $9.83 in 2008 and to $21.33 from $15.02 in 2009.
Separately, Credit Suisse Analyst Mark Connelly raised Potash's target stock price to $280 from $210. He raised 2008 earnings expectations to $11.30 from $10.50 and raised 2009 earnings to $19.13 to from $12 a share on higher realized potash, phosphorous and nitrogen prices.
Analysts polled by Thomson Financial had been expecting Agrium to have earnings of $8.18 in 2008 and $10.22 in 2009. Potash was expected to have earnings of $11.04 in 2008 and $18.36 in 2009.
"While natural gas and sulfur costs do provide some headwinds in the near term, price increases should more than offset cost increases," Connelly said.
On Friday, Agrium said location plans for its Egyptian nitrogen plant fell through--and may result in $280.0-million in write-offs in the upcoming quarter. After voting to relocate Agrium's facility, the Egyptian government offered the company two options: a buyout of its investment in the project and/or granting the company an interest in an adjacent government-owned nitrogen facility.
Although Agrium said it would consider all options in an attempt to fully recover costs, it warned that moving the facility wasn't a viable option since it would require new financing, permits and contracts. The company's warning for possible write-offs in the second-quarter came little more than a week after it raised its second-quarter guidance on strong performance in its retail and wholesale businesses (See: Fertile Environment For Agrium).
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