Agrium, Inc. (NYSE: AGU - News) is growing through acquisition and incremental expansion of existing operations. The proposed UAP Holding Corp. acquisition is likely to drive revenues and profit for Agrium on the back of an expanded product line in the major business segment.
Supply/demand is expected to remain strong for nitrogen and phosphate fertilizers through 2011 and the company has high leverage to increasing product prices. Agrium also has significant free cash flow. As a result, we rate the shares a Buy with a target of $118.00. This is 17.0x our 2008 estimate. Currently, Agrium is trading at 14.9x our 2008 estimate of $6.95.
In 2008, the company expects synergies of approximately $20 million and $80 million in 2009. The strategy is to increase seed sales and increase private label sales. The company expects good growth in the seed sales and crop protection chemicals business in 2008, when the product lines are expected to expand with the UAP acquisition. Margins should be elevated for at least 2-3 years
Subscribe to:
Post Comments (Atom)
No comments:
Post a Comment