Earnings Report & Global Forces Supress Upside

October 8, 2012 09:39 AM

Bears are making an appearance as key fertilizer companies fail to wow shareholders. Mosaic is attracting attention for lackluster F1Q earnings reported Tuesday that showed a year-over revenue shortfall of 19%. This comes on the heels of news that India will not purchase any nutria from Canada's Canpotex until next spring.

Canpotex encompasses Mosaic, PotashCorp and Agrium, the big three in Canadian Ag, and the leaders in Global nutrient exporters. Agrium is somewhat insulated from market pressures by its retail/wholesale model. But Mosaic and PotashCorp have a great deal more exposure than AGU and stand to lose the most in a bear market.

Lazard Capital, "doesn't foresee any imminent improvement in fundamentals or upward earnings revisions that should lead to meaningful stock-price appreciation." Lazard has downgraded its rating from "Buy" on both PotashCorp and Mosaic as it cannot bring itself to say, "buy on weakness".

Lazard also believes that if potash prices would come down some, India might be more interested in a buy. Your Inputs Monitor disagrees. Part of the reason India has refused to make their fall purchase is because the government there is looking to dramatically cut fertilizer subsidies to growers. My estimation is that no matter how sweet the deal, India has fiscal concerns that will prohibit that purchase.

Fertilizer stocks were expected to chase grain markets higher in this drought driven season, but Global forces now have investors eyeing a possible bear market.

As of now (2:30 CT)...

Mosaic (MOS) currently down on the day, 38 cents lower to 54.71.

PotashCorp (POT) currently 23 cents lower on the day to 41.71.

Agrium (AGU) down by the widest margin of the three -- lower today by seventy cents at 103.57.


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