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A Look at Gross Margin Estimates for Agrium in 3Q16



Gross margin

Previously in this series, we looked at Agrium’s (AGU) sales segments and analysts’ sales estimates for 3Q16. In addition to contributing the most to sales, the retail segment contributes the most towards Agrium’s gross margin. In 2Q16 alone, the company’s retail segment contributed about 84% of the overall gross margin. Once again, crop protection and crop nutrients contributed the most within the segment.

In the wholesale (MOO) segment, which contributed about 14% of the company’s gross margin in 2Q16, nitrogen represented the largest share.

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3Q16 estimates

Unlike PotashCorp’s (POT), Mosaic’s (MOS), and CF Industries’ (CF) gross margins, Agrium’s margin is not expected to contract much.

In 3Q16, Agrium’s gross margin is expected to contract to 24.1% from 27.6% in 3Q15. Agrium’s gross margin contracted in the first half of 2016, and analysts expect this trend to continue in the second half, though at a more rapid pace.

Fiscal 2016 and 2017 estimates

Analysts forecast a gross margin of 24.6% for fiscal 2016, down from 26.3% in 2015. In 2017, analysts expect Agrium’s gross margins to expand slightly to 24.7%. Next, we’ll discuss analysts’ estimates for Agrium’s EPS (earnings per share) in 3Q16.


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