The world is seeing a rapidly developing middle class in countries such as Brazil, India, and China, and their demand for quality food is heading north. Global population, especially in emerging markets, continues to rise. A gain in wealth in these markets has fueled a demand for more and higher quality food. There is a need for an acre of land to yield more produce. Prices of soybeans, wheat, and corn are rising, with corn prices up 86% from a year ago. Major fertilizers like phosphate, sulfur and ammonia have been rising in price since mid-2010.
CF Industries (CF) is a North American manufacturer and distributor of agricultural fertilizers, based in Deerfield, Illinois. Its IPO came in 2005. Its current P/E is at 23.44, with a dividend yield of 0.40 (0.30%), and is trading at $125.19. Investors should anticipate falling nitrogen prices to weigh on stock prices for CF industries, as well as other fertilizer companies.
Potash Corporation of Saskatchewan (POT) is the world's largest potash producer and the second and third largest producers of nitrogen and phosphate, three primary crop nutrients used to produce fertilizer. The world’s largest consumers of these products are China, the United States, Brazil and India. Their current P/E ratio is 28.11, with a dividend yield of 0.29 (0.50%), and is trading at $55.66. Goldman Sachs has upgraded Potash Corporation of Saskatchewan Inc to buy from neutral. Potash is the 6th fastest-growing stock in this segment of the market. Its longer-term annual EPS growth is expected to be 20.9%. This number is based on the average estimate of three brokerage analysts.
Agrium Inc. (AGU) is a major retail supplier of agricultural products and service in North and South America, a leading global wholesale producer and marketer of all three major agricultural nutrients and the premier supplier of specialty fertilizers in North America through its Advanced Technologies business unit. Agrium’s strategy is to grow the value chain through acquisition, incremental expansion of its existing operations and through the development, commercialization and marketing of new products and international opportunities. Its current P/E is 19.49, with a dividend yield of 0.11 (0.10%), and is currently trading at $88.11. Last month Agrium reported 4th quarter net earnings of $158 million as compared to $30 million for the same period last year.
Mosaic Company (MOS) launched in October of 2004, and was formed by a merger between the crop nutrition division of Cargill, Inc. and IMC Global Inc. Mosaic is currently the world’s largest producer of phosphate and the second-largest producer of potash. Its current P/E ratio is 17.77, with a dividend yield of 0.20 (0.30%), and is trading at $77.13.
Intrepid Potash, Inc. (IPI) is based in Denver, Colorado, is the largest producer of potassium chloride, also known as muriate of potash, in the United States. It owns three mines, all in the Western U.S., near the cities of Carlsbad, New Mexico, Moab, Utah, and Wendover, Utah. Its current P/E ratio is 55.85, and is trading at $33.51. Intrepid is the 10th fastest-growing stock in this segment of the market. Its longer-term annual EPS growth is expected to be 16.0%. This number is based on the average estimate of two brokerage analysts.
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