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Analysts drop earnings forecasts for Potash

Analysts drop earnings forecasts for Potash

Analysts are mulling over the impact of Potash Corporation's (TSE:POT) (NYSE:POT) lower full-year guidance after second quarter results missed the street consensus.

BMO Capital Markets said it had expected Potash to lower its 2013 forecast, which is now US$2.45 to $2.70 per share compared to the prior US$2.75 to US$3.25 range. The high end of that range is below the US$2.84 per share that analysts had collectively predicted.

Canaccord Genuity, whose own 2013 estimate was US$2.73, said there are not enough catalysts for either Potash or the industry as a whole. 

BMO, which had already lowered its 2013 estimate two weeks ago, cut it again to US$2.54 from US$2.61 per share. However, BMO is maintaining its "outperform" rating and $46 price target, a 20 per cent premium on Thursday's Canadian market close. 

"We continue to expect mining commodity-focused investors to view Potash as a relatively safe harbour with a strong balance sheet and attractive FCF growth," BMO analyst Joel Jackson wrote.

Canaccord, with a "hold" rating and US$40 price target, is less optimistic. Analyst Keith Carpenter believes peers Monsanto (NYSE:MON) and Agrium (TSE:AGU) (NYSE:AGU) are better bets.

Analysts at Raymond James, meanwhile, slashed the fertilizer firm to "market perform" from "outperform."

Despite maintaining its rating, BMO's forecast drops were widespread as it lowered its third quarter earnings estimate for 2013 to 56 cents from 63 cents per share, fourth quarter estimate to 61 cents per share from 63 cents per share and its full-year 2014 forecast to US$2.81 from US$2.85 per share.

Canaccord predicted third quarter earnings of 69 cents per share, against Potash's 45 to 60-cent guidance.

BMO expects a dividend hike by the third quarter of next year, once the $2 billion share repurchase program announced on Wednesday wraps up, to keep Potash's payout ratio close to 50 per cent.

Potash has lagged its rivals over the past year, shedding 17 per cent of its value, compared to Agrium's six per cent drop and Monsanto's 15 per cent gain.

The stock lost 21 cents on the TSX to close Friday's trading. 

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Potash Corporation of Saskatchewan Timeline

October 05 2015

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