Agrium (AGU) Lifts Guidance, Stock Surges

Agrium (AGU) the smallest of the 3 major potash producers in Canpotex is out this morning with increased guidance - expect the same from Mosaic (MOS) and Potash (POT). This is leading the sector higher with AGU up 9% in early trading - keep in mind unlike the other 2 names mentioned, Agrium has a large retail component. Essentially they've taken their own lowball guidance up by around 80 cents, and now are firmly over the analysts $2.50. Looks like analysts are *still* behind the curve even after making huge upward revisions the past 60-90 days, once they saw the writing on the wall - writing we were urging them to see last fall [Oct 23: Analysts Still Doubting the Fertilizer Stocks] I wrote

Folks, I am not a full time fertilizer analyst working for a major brokerage (in fact the closest I get to fertlizer is what the dog leaves on the lawn on a daily basis), and even I could see months ago the 'big picture' - by doing a little digging and seeing the contracts being signed and huge price increases - well you can see the obvious. Not sure what world the analysts live in aside from the 'err on caution' world.

I wrote in this week's position review that I was really liking the way the fertilizers were holding up and they looked poised to break out (although I am not at a full exposure due to the overall market) and thus far they have performed splendidly...

I really like the action in the fertilizer group right now - a nice period of consolidation, where the companies faded from the attention of CNBC and most daytraders/momentum traders. If the market were more stable I'd be increasing my exposure materially to this group right at this moment as it has all the markings of a new breakout - but it is simply hard to do that with the headwinds facing the market, and knowing if we do have a sustained move down, these "favored" groups sustain NASTY reversals, quite out of the blue.

• Canadian fertilizer maker Agrium Inc. on Wednesday raised its outlook for second-quarter earnings per share to a range of $2.80 and $3, due to strong retail and wholesale performance.
• The company previously forecast profit of $1.92 to $2.22 per share for the second quarter. The guidance excludes any additional stock-based compensation expense, gains from natural gas and currency hedging positions and contributions from the UAP acquisition.
• On average, analysts surveyed by Thomson Financial expect quarterly profit of $2.50 per share.
• "Our excellent results are due to strong performance from both our retail and wholesale operations, which is particularly impressive given that the North American spring application season has been hampered by excessively cold and wet weather this year," said Mike Wilson, Agrium president and chief executive. "Continued strong global crop prices have created unprecedented demand for crop inputs and we foresee an extended demand-driven cycle."

If you are an Agrium investor there is also some not so positive news on an Egyptian initiative but I don't follow the company that closely so I cannot comment on that piece of business.

Long Mosaic, Potash in fund; long Mosaic in personal account