Mosaic and Other Fertilizer Producers Pull Back
Shares of fertilizer producers have pulled back recently, due in part to a USDA report that showed that, while the devastating drought in the Midwest continues, corn conditions were unchanged and soybean conditions improved slightly.
Mosaic (NYSE: MOS) shares have fallen more than four percent in the past two weeks. Last week, a Stifel Nicolaus analyst resumed coverage of Mosaic on the belief that the fertilizer company would benefit in wake of the drought. The Minnesota-based producer of phosphate- and potash-based crop nutrients for the agriculture industry worldwide has a market capitalization of about $24 billion. It nearly doubled the dividend yield in the most recent quarter; the yield is now about 1.8 percent. The operating margin is higher than the industry average, and the return on equity is more than 16 percent. The stock has outperformed Market Vectors Agribusiness ETF (NYSE: MOO) but underperformed the S&P 500 over the past six months. Mosaic shares were trading above $57 Wednesday afternoon, in a 52-week range of $44.43 to $73.97.
See also: Mosaic Names O'Rourke COO
Canadian competitor Potash Corp. of Saskatchewan (NYSE: POT) has seen its shares drop more than eight percent in the two weeks, when Potash said it would shut a mine for a month, which was expected to cut production by 275K metric tons. The market cap of this producer of fertilizers and feed products is more than $35 billion. The dividend yield is about 1.4 percent; it was doubled to $0.14 per share earlier this year. Potash's long-term EPS growth forecast is higher than 10 percent, the operating margin is greater than the industry average and the return on equity is a healthy 30.3 percent. Over the past six months, the stock has underperformed competitors Mosaic and Monsanto (NYSE: MON). Potash shares closed Tuesday at $40.75 and were trading near there Wednesday afternoon. The 52-week range is $36.73 to $60.42.
The share price of Intrepid Potash (NYSE: IPI) has pulled back about four percent in the past month. Earlier this month, the company posted better-than-expected second-quarter revenue, and it raised its full-year sales estimate back in July. This fertilizer maker is headquartered in Denver and sports a market cap of about $1.6 billion. There is no dividend here, but the long-term EPS growth forecast is about 29 percent and the operating margin is much higher than the industry average. The price-to-earnings (P/E) ratio is higher than the industry average, but forecast to decline. Over the past six months, the stock has underperformed competitors Mosaic and Agrium (NYSE: AGU) as well as the broader markets. Shares have been trading mostly between $21.50 and $22.50 for the past three weeks.
Illinois-based CF Industries (NYSE: CF) has pulled back more than five percent from a recent multiyear high of $207.99. CF Industries just announced the precautionary shutdown of a facility in Louisiana ahead of the arrival of Hurricane Isaac. This nitrogen and phosphate producer is an S&P 500 component with a market cap of around $13 billion. It has a dividend yield of less than one percent. The long-term EPS growth forecast is more than 10 percent, while the return on equity is above 35 percent. The mean price target of analysts, or where they expect the share price to go, is about 12 percent higher than the current share price. The stock has outperformed Postash Corp. and the S&P 500 over the past six months.
The Market Vectors Agribusiness ETF includes Mosaic, CF Industries, Monsanto and Toronto-traded shares of Potash and Agrium among its top holdings. Since early June, shares are up more than 10 percent, though they have pulled back slightly in the past week or so. Wednesday afternoon, they were trading a bit above $50 per share.
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