Susquehanna Downgrades Mosaic On Lower Earnings outlook

Potash producers largely reported lower pricing in 2Q16. Although they seem to be taking strategic actions to align production with demand, estimates have been reduced to reflect a lower pricing outlook, Susquehanna’s Don Carson said in a report.

Analyst Carson believes that although potash prices and volumes firmed in 3Q16, following signing of contracts with China and India, the price recovery would be limited because of oversupply and low grain prices arising from record US corn and soy crops in 2016 and 2017.

Moreover, phosphate prices continue to be soft in Asia and there has been a continued decline in prices in recent phosphate tenders in India and Indonesia due to higher supplies.

Mosaic

Carson downgraded the rating on Mosaic Co MOS from Positive to Neutral, while reducing the price target from $30 to $28. The adjusted EPS estimates for 2016 and 2017 have been reduced from $0.95 to $0.45 and from $1.80 to $1.10, respectively.

Potash Corp

The analyst maintained a Neutral rating on Potash Corporation of Saskatchewan (USA) POT, while raising the price target from $14 to $16. The adjusted EPS estimates for 2016 and 2017 have been reduced from $0.75 to $0.55 and from $0.95 to $0.85, respectively.

Although Mosaic is focused on preserving cash and reducing operating expenses, the company maintained its annual dividend of $1.10 per share, which translates to $385 million annually. Meanwhile, Potash Corporation of Saskatchewan cut its dividend to preserve cash, Carson noted.

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