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Agribusiness Stocks: November Post-Earnings Update

PART:
1 2 3 4 5 6 7 8 9
Part 2
Agribusiness Stocks: November Post-Earnings Update PART 2 OF 9

PotashCorp: Analyst’ Ratings and Target Price Upgrade

PotashCorp’s earnings were lower

PotashCorp (POT) released its 3Q17 earnings on October 26, 2017. The company missed analysts’ estimates on profits and the stock saw selling pressure. Since the company’s earnings, the stock has fallen ~1.4% to $19.1 as of November 10. PotashCorp, which is set to merge with Agrium (AGU) by the end of 4Q17, has delivered YTD (year-to-date) returns of ~5%. It has underperformed the VanEck Vectors Agribusiness ETF’s (MOO) YTD returns of 15.6%.

To learn about PotashCorp’s 3Q17 earnings, read Why PotashCorp’s 3Q17 Earnings Dragged the Stock Down.

PotashCorp: Analyst&#8217; Ratings and Target Price Upgrade

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Analysts’ ratings

As of November 10, the consensus mean rating of 21 analysts for PotashCorp stood at 2.6 with an overall recommendation of a “hold.” The rating didn’t change since our previous rating update in October.

In the above chart, you can see that analysts’ recommendations didn’t change in the current month. Out of the 21 analysts, two have a “strong buy” recommendation and seven have a “buy” recommendation on the stock for the next 12-month period.

Most of the analysts continue to recommend a “hold” on the stock. While some of the fertilizer prices have picked up, the subdued environment in the near term might justify this recommendation.

Similar to last month’s update, two analysts have maintained a “sell” recommendation, while none of the analysts recommended a “strong sell” for the next 12-month period. It’s important to note that these are sell-side recommendations. These analysts rarely give a “sell” recommendation for a stock. You will see a similar trend for CF Industries (CF) and Mosaic (MOS) later in this series.

Target price

The current consensus mean target price for PotashCorp was $21.8—slightly higher than $21.6 a month ago. When we compare the target price with the November 10 market closing price of $19.1, we get 14.3%—provided that the market price converges with the target.

Following PotashCorp’s earnings, JPMorgan Chase raised its target price to $19 from $17, while UBS raised its target price to $22 from $21. On October 25, Raymond James raised its target price from $19 to $20.

In the next part, we’ll discuss analysts’ ratings for Agrium.

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