UPDATE: Bank Of America Downgrades Agrium

Bank of America downgraded Agrium Inc. (USA) AGU from Neutral to Underperform Wednesday and maintained a $99 price target.

Analyst Kevin W. McCarthy noted that “Any permanent closure of Uralkali’s Solikamsk-2 mine could support potash prices, but we don’t see a compelling reason to raise our EPS estimates or [PT]at this juncture. Meanwhile, we expect demand for agricultural inputs to remain sluggish in 2015.”

“We remain constructive on nitrogen (32 percent of 2015 EBITDA), where earnings should rebound in 2015 following recent investments to improve operating reliability. In potash (12 percent of 2015 EBITDA), we expect Agrium’s volume to grow 48 percent next year, albeit from a low base with Vanscoy down now for a 50 percent capacity expansion,” according to McCarthy.

“However, potash is oversupplied, and global demand growth could regress from a heady pace of ~11 percent in 2014. Let’s say we’re wrong though. If Uralkali’s Solikamsk-2 mine is closed and global demand remains strong such that potash prices surprise on the upside, then we believe investors would be better served by greater potash leverage via Buy-rated [Mosaic Co]...or Neutral-rated [Potash Corp./Saskatchewan],” McCarthy concluded.

Agrium closed on Tuesday at $98.84, down 0.74 percent.