Potash Corp. Poised to Double Market Capitalization

Despite some near term hiccups based on ongoing labour uncertainty and market volatility, Potash Corp. of Saskatchewan Inc. (POT) is still poised to more than double its market capitalization to a whopping C$130-billion sometime over the next year, according to Canaccord Adams analyst Keith Carpenter.

Mr. Carpenter reiterated his "buy" rating and his impressive 12-month price target of C$425 for Potash Corp. shares on Friday, while weighing in on the announcement earlier this week from the company that it has restarted potash mining and milling operations at its Allan mine in Saskatchewan.

In early August, unionized employees at Potash Corp's Allan, Cory and Patience Lake mines potash operations went on strike. Allan is the largest of the mines impacted by the worker's action, accounting for approximately 19% of the company’s annual potash production. The company said in a statement that contingency plans continue to be evaluated for the Cory and Patience Lake facilities while progress on potash debottlenecking and expansion projects at all three sites has been minimally impacted by the strikes.

In a note to clients, Mr. Carpenter said:

While we are encouraged to see contingency measures put in place, in our model we continue to assume a three-month reduction of supply from the three affected mines.

If we were to assume that the strike continues for the remainder of 2008, our full-year EPS estimate would drop to approximately $11.94 from $12.69.

JPMorgan analyst David Silver, meanwhile, said a strike lasting eight weeks would reduce Potash earnings by C$0.15 to C$0.20 per share and importantly may force the company to declare force majeure due to an inability to meet its current contractual commitments. Force majeure is a legal clause that allows a company to miss deliveries because of circumstances beyond its control.

Canaccord's Mr. Carpenter told clients he expects more volatility ahead for the stock in the short term with shares remaining caught up in the current unsettled market sentiment.

But ultimately, he added, the stock will regain its swagger and head towards his lofty price target based on the company's growth profile and earnings that will be "unmatched by its peers."