Thanks to a reader who sent me one of the 2 analyst reports today. Some good info out there (including risks from rising natural gas and sulphur) but the earnings upgrades are astounding. I wrote back in October the analysts have been wrong, and continue to be wrong on their estimates [Oct 23: Analysts Still Doubting the Fertilizer Stocks]. Now, prices have even surpassed my rosy assumption, so even I've been wrong in my estimates for the future - I was thinking $9.00+ EPS for Mosaic in 2009 (current consensus $7.40). Merrill Lynch just blew me out of the water. This is why I keep saying forget basing these on analyst estimates - they are sorely lacking...
Mosaic
2009 (old) $7.65 (new) $12.00
2010 (old) $8.30 (new) $14.50
Potash
2009 (old) $9.80 (new) $14.00
2010 (old) $11.00 (new) $16.00
CF Industries
2009 (old) $13.00 (new) $18.00
2010 (old) $13.00 (old) $20.00
And with that... I think analysts have finally gotten the picture... finally.
....these numbers continue to make the frantic hang wringing over input costs that cause these stocks to continuosly sell off simply silly. Stick with fertilizer and stick with Cram.... err, umm... well stick with fertilizer... ;)
Long all names mentioned in fund; long Mosaic in personal account
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4 comments:
I enjoy your blog. I'm a big fan of MOS CF too. But still on a short term bases, I am not sure how careful I need to be. Last time I was with the shipping sector, it was like now when these stupid analysts come out to raise earning estimates, the next thing you know, all stocks start tanking and haven't fully recovered. I'm still holding MOS tho at this point.
Can you post at least some of the ML news.
Jerry you nailed it
The problem is as analysts finally "get it" they raise estimates. At some point they will get to a point they raise earnings too far, the company executing perfectly, misses some outrageous target and instead of 70% growth, a company comes in at 69.887% and the stock sells off 40%
Isn't that great logic? That's how our markets work.
What I've loved about fertilizer thus far is analysts are wrong, and thus beating the number is "in the bag". Each progressive quarter it will get tougher to hold these names around earnings because they will beat by "less and less", and eventually "miss".... all giving fodder for bears.
In this world if a company is growing 50% but expectations are 35% it is far better than if a company is growing 65% and the expectations are 60%. You'd think 65% is better than 50% but not in the world of investing. It's all about the "expectations game". With this increase by Merrill Lynch, the expectations will shit up. That said, the stock prices do not currently reflect these new rosy numbers.
D, I can't cut and paste, its in pdf - I'll give you the 1st paragraph summary thoughts
Fertilizer share price volatility has increased due to macro concerns about speculative interesting commodities shifting to the short side, but crop and fertilizer supply.demand fundamentals have continued to strengthen. Global corn and wheat stocks are at 30/60 year lows... we see the recent pullback as buying oppt. Sharply higher nat gas prices have eroded nitrogen profitability ...
then it just breaks down each point. Much of what I have written here.
oops, sorry for the typo above... I meant SHOOT up. SHOOT. Hopefully no one under 18 is reading ;)
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