What Weighed on PotashCorp’s Earnings in 2Q16?
PotashCorp (POT) missed analysts’ estimates for EPS (earnings per share) in the past five consecutive quarters. Earnings for most of the agricultural fertilizer companies are expected to decline in 2Q16 quarter, similar to what we saw in 1Q16.
Please read Comps Happen: How Fertilizer Companies Performed during 1Q16 to learn more.
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What does 2Q16 hold?
For 2Q16, Wall Street analysts are estimating PotashCorp’s earnings to decline to $0.19 per share by as much as 62% year-over-year. Similarly, analysts are estimating Mosaic (MOS) to report an earnings decline of 87% to $0.14 per share.
Agrium’s (AGU) earnings are estimated to decline by 13% to $4.10 per share. A pure nitrogen fertilizer producer such as CF Industries (CF) is also expected to see its earnings decline by as much as 58% to $0.68 per share.
Fertilizer prices have fallen to multiyear lows. For more information, please read Urea Prices Fell Last Week: How Did Other Fertilizers Perform? The near-term outlook for fertilizer demand is expected to remain muted.
The weakness in crop prices (MXI) provides a disincentive for farmers to spend on fertilizers, especially for potash and phosphate that don’t need to be applied every year. All these factors appear to contribute to the weakness in earnings for the above companies.
In the final part of this series, we’ll look at PotashCorp’s valuation and compare it with the industry median.