Monsanto and Other Credit Suisse Agriculture Picks
Citing increasing demand for potash in the second half of the year, particularly from Latin America and Southeast Asia, as well as ongoing demand for phosphates and market growth in agricultural biotech, Credit Suisse (NYSE: CS) this week have initiated coverage on several fertilizer makers.
While CF Industries (NYSE: CF), Intrepid Potash (NYSE: IPI) and Mosaic (NYSE: MOS) were started at Neutral, Agrium (NYSE: AGU), Monsanto (NYSE: MON) and Potash Corp. of Saskatchewan (NYSE: POT) were started with Outperform ratings.
Here is a quick look at how these three Outperform-rated stocks have fared and what analysts in general expect from them.
This Calgary-based producer of agricultural chemical products has a market cap near $16 billion and a dividend yield of about 0.9 percent. Its price-to-earnings (P/E) ratio is less than the industry average, but the long-term earnings per share (EPS) growth forecast is only about 6.5 percent. The return on equity is more than 21 percent, and the operating margin is higher with than the industry average. Shares sold short represent less than one percent the float. That is the second lowest level of short interest in the past year.
The consensus recommendation of 26 analysts who follow the stock and were polled by Thomson/First Call is to buy shares, and it has been for at least three months. But note that the analysts' mean price target, or where they expect the share price to go, is only marginally higher than the current share price. Credit Suisse, though, has a $127 price target, which implies more than 14 percent upside.
The share price reached a new 52-week high today, and shares are now trading more than 37 percent higher than six months ago. In that time, the stock has outperformed competitors CF Industries and Potash Corp., as well as the broader markets.
This agricultural biotechnology corporation, known for its Roundup brand, is headquartered in St. Louis. It sports a market cap of more than $54 billion and offers a dividend yield of about 1.5 percent. The P/E ratio is higher than the industry average, and the long-term EPS growth forecast is about 11 percent. But the operating margin is higher than the industry average, and the return on equity is more than 19 percent. The short interest is a little more than one percent of the float, after falling since November.
The consensus recommendation of the 26 analysts surveyed is to buy the stock; only one analyst recommends selling shares. The analysts currently believe the stock has a little room for growth, as their mean price target is more than six percent higher than the current share price. But the Credit Suisse target of $120 represents more than 15 percent potential upside.
Monsanto shares are trading near a multiyear high after rising about 25 percent in the past year, as well as 10 percent in the past month. However, over the past six months, the stock has underperformed Swiss competitor Syngenta (NYSE: SYT), even though it has outperformed the broader markets.
This Canadian fertilizer and feed products maker has a market cap near $36 billion and a dividend yield of about two percent. Its return on equity is more than 27 percent, and the operating margin is much higher than the industry average. But the long-term EPS growth forecast is only about five percent, while the P/E ratio is higher than the industry average. Note that the short interest was less than one percent of the float at the end of December settlement date.
Again the consensus recommendation of the analysts surveyed is to buy shares, and it has been for at least three months. Just one analyst rates shares at Underperform. The mean price target is more than 11 percent higher than the current share price. Credit Suisse's $50 target is more than 16 percent higher, and a level the share price has not seen since October of 2011.
Despite rising about 13 percent since mid-November, the share price is still more than seven percent lower than a year ago. Over the past six months, the stock has underperformed the likes of Monsanto and Mosaic, as well as the broader markets.
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