Thursday, January 28, 2010

Potash (POT) Beats But Guides Down for Q1 and Full year 2010

I have not been expecting anything particularly strong out of Potash (POT) - it was a lower risk way to play the "weak dollar, commodities must go up as the economic boom returns" thesis.  Today's results were so-so, a small beat versus estimates but lowering of guidance for 2010.  I had not realized a limit order for our stop loss in Potash had hit yesterday at $107.71, which we had mentioned Tuesday [Jan 26, 2010: Overview of Remaining Material Long Positions] so we only had a 0.4% exposure coming into the day.  Looks like the low of the day was $106.90.
Potash (POT) - stop loss is in the high $107s area; just missed executing this morning. The chart is not good, but has held up much better than coal, steel, copper and other such areas which have been trounced lately

Premarket action shows the stock around $104 and certain to test that 200 day moving average.


Commodities have been hit so hard the past 6-7 sessions, I expect an oversold bounce sooner or later - but at this point with the weak action we've been stopped out of most of what little commodity exposure we had.

  • Potash Corp of Saskatchewan (POT), the world's largest fertilizer maker, said on Thursday that fourth-quarter earnings fell almost 70 percent as pricing of key crop nutrients like potash and phosphate have declined sharply from a year ago.
  • Fourth-quarter earnings fell to $243.6 million, or 80 cents a share, from $788 million, or $2.56 a share, a year earlier.  Revenue fell 41 percent to $1.10 billion, the company said in a statement.  Analysts on average had forecast earnings of 78 cents a share on revenue of $1.07 billion, according to Thomson Reuters I/B/E/S.
  • The company also forecast first-quarter and full-year 2010 earnings below analysts' current consensus levels, but expressed optimism that fertilizer demand would bounce back strongly this year. (the same optimism they've been expressing for about 5 quarters in a row - eventually the broken clock will be correct)
  • The Saskatoon, Saskatchewan-based company said it expected global potash shipments of about 50 million tonnes in 2010, well above 2009 levels. But it cautioned that this rebound in demand was contingent on strong grain prices.
  • Potash Corp forecast earnings of 70 cents to $1.00 a share for the first quarter and $4.00 to $5.00 for all of 2010.
Frankly Potash the stock is expensive if $4 is all they will be able to do in 2010.... consensus is $5.89; but as we explained yesterday in the piece about US Steel (X), people have been piling into any "cyclical" stock on presumption of some grand recovery - which in theory would make very expensive stocks suddenly cheap a year or 18 months out.   Potash remains a very well positioned company in the long run - but I continue to believe people are way ahead of themselves on "cyclical recovery" stocks.

Full report
here - a required read if you are an agriculture bull.

 Long Potash in fund; no personal position

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