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BMO Recommends Selling Into Strength on Fertilizer Names, Lifts Price Targets Across the Board

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BMO Capital's Joel Jackson issued a somewhat bearish research note on the Fertilizer sector Wednesday morning. The analyst suggested investors should "sell into strength from the recent rebound." Jackson maintains a Market Perform rating on the industry.

Jackson warned of premiums related to "the typical Jan/Feb spring lift and BPC 2.0 price-over-volume reunion prospects" which might already be baked into the stocks. The BMO analyst also noted the following concerns:

  • consensus estimates for 2014, 2015 which need to come down;
  • "materially lower" crop prices;
  • US urea may cool off following an "overheating";
  • limited further price boosts in the phosphate group;
  • deteriorating supply and demand dynamics in potash; and
  • the potential for potash prices in China to disappoint.

Agrium (NYSE: AGU) and Yara remain Jackson's top picks for the space. He noted each of these companies have not yet "seen the MLP-hype like CF" (NYSE: CF). Jackson maintains Market Perform ratings on Potash (NYSE: POT) and Mosaic (NYSE: MOS) shares and an Underperform rating on Interpid Potash (NYSE: IPI).

The BMO analyst boosted his price target on CF Industries from $215 to $225, on Intrepid Potash from $11 to $12, on Mosaic from $40 to $4 and the Potash price target from $28 to $30.

The Market Vectors Agribusines ETF (NYSE: MOO) is up 0.5 percent heading into Wednesday's close.

Latest Ratings for AGU

DateFirmActionFromTo
Apr 2016Vertical ResearchDowngradesBuyHold
Feb 2016BarclaysMaintainsOverweight
Jan 2016SusquehannaMaintainsPositive

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