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Key Takeaways from Agrium’s 2017 Earnings Estimates

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Earnings

As we discussed in earlier parts of this series, analysts are estimating an improvement in Agrium’s (AGU) financial performance in 2017. Let’s look at how sales growth coupled with margin improvement translate to earnings growth.

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Earnings estimates

Agrium’s (AGU) earnings for 1Q17 are estimated to fall from $0.05 per share in 1Q16 to -$0.06 per share. In the second quarter, when the majority of Agrium’s sales take place, earnings per share are estimated to rise 5% to $4.38 per share year-over-year.

For fiscal 2017, Wall Street analysts are estimating the company’s earnings per share to grow by as much as 9.6% to $5.35 per share from $4.88 per share in fiscal 2016. Keep in mind that much of this growth will come from cost optimization as opposed to growth in sales.

Optimizing costs

Optimizing costs remains the number one strategy for fertilizer companies until selling prices rise. The market is experiencing overcapacity with companies such as PotashCorp (POT), CF Industries (CF), and Mosaic (MOS) expanding capacity in recent years. Lately, producers have rationed capacity expansion projects to allow the market to come to an equilibrium. However, since the equilibrium has taken longer than expected, the fertilizer industry (MOO) is undergoing consolidation.

Next, we’ll discuss capital expenditure estimates for Agrium.

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