Stocks That Just Lowered the Boom

When a company forecasts lower sales or profits, its stock usually takes a hit. It's not always easy to tell whether your company is having a fire sale or burning down. Maybe it is time to get out -- or maybe it's time to buy more!

To help tell the difference, we pair up dour guidance news with the sentiments of more than 180,000 members of Motley Fool CAPS. If the best stock pickers think the companies still have the power to turn lemons into lemonade, maybe investors should take notice.

Here are two stocks that have recently announced reduced guidance.

Stock

CAPS Rating
(out of 5)

Previous or Consensus Estimate

Current Guidance

Period

PotashCorp (NYSE: POT  ) ***** $3.61 $3.20 - $3.60 FY 12 EPS
Weatherford Int'l (NYSE: WFT  ) **** $0.27 $0.24 - $0.26 Q2 12 EPS

Don't blindly sell into their bearish outlook -- you still need to do some research. Use the announcement as a jumping off point for additional research.

Reap what ye sow
The world's gotta eat, but that's not translating into fertilizer sales for PotashCorp, which forecast global demand for its eponymous crop ingredient to increase to 53 million-56 million tonnes this year, down from prior expectations of as much as 58 million tonnes. Its own sales volume is anticipated to come in in the range of 8.8 million-9.2 million tonnes from prior forecasts of 9.2 million-10 million tonnes.

Other nutrients aren't faring as poorly as potash, as phosphates and nitrogen saw volumes and gross margins rise. CF Industries (NYSE: CF  ) just reported its earnings, underscoring that same outlook: Nitrogen sales jumped 37% and it expects robust corn plantings and favorable natural gas pricing to keep the momentum moving.

Last year, as commodities soared, fertilizer companies boosted production to capture more profits leading to a surfeit of nitrogen and potash on the market. While the nitrogen market has steadily improved, PotashCorp says potash remains in a weak pricing environment. Intrepid Potash (NYSE: IPI  ) noted the cautious attitude of potash dealers early in the quarter, but said as the weather warmed up more sales came its way.

CAPS member jackycheng believes a ceiling has formed above potash demand and that will continue to weigh on PotashCorp's stock, which is down 19% from a year ago, but more than 30% from its 52-week highs. Tell me in the comments section below or on the PotashCorp CAPS page if you think it's reaping what it's sown.

Taking stock of gas
It's way too early to forecast a recovery in the natural gas markets, but with a production cut of 0.6% representing the largest drop in a year, gas prices have hit their highest level in a month, bouncing off of the sub-$2 level they had fallen to. Of course, inventories remain well above the five-year average, but it seems the cuts Chesapeake Energy (NYSE: CHK  ) and other drillers initiated are finally having an impact.

But because the industry has been trying to stand on the brakes in an effort to gain control of a vehicle careening out of control, the services industry that supports natural gas players is feeling the effects. Weatherford International said even though its North American segment saw revenues rise 30% in the quarter, a "timid natural gas environment" held it back. With its earnings forecast coming in below analyst expectations for the third quarter, investors are likely expecting the industry to keep its foot off the gas for a while.

Yet 97% of the CAPS members rating Weatherford believe it will be able to bounce back and beat the market averages. Add the industry services firm to the Fool's free portfolio tracker to see if better natural gas metrics will encourage drillers to expand once again, and let us know on the Weatherford International CAPS page what its prospects are.

Looking under rocks
These stocks may have lowered expectations, but The Motley Fool has identified The Only Energy Stock You'll Ever Need. You can get instant access to this rising star by clicking here -- it's free! But only for a limited time, so hurry.

Fool contributor Rich Duprey holds no position in any company mentioned. Click here to see his holdings and a short bio. The Motley Fool owns shares of CF Industries Holdings. Motley Fool newsletter services have recommended buying shares of PotashCorp and Chesapeake Energy. The Motley Fool has a disclosure policy. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.


Read/Post Comments (3) | Recommend This Article (4)

Comments from our Foolish Readers

Help us keep this a respectfully Foolish area! This is a place for our readers to discuss, debate, and learn more about the Foolish investing topic you read about above. Help us keep it clean and safe. If you believe a comment is abusive or otherwise violates our Fool's Rules, please report it via the Report this Comment Report this Comment icon found on every comment.

  • Report this Comment On May 06, 2012, at 2:02 PM, tavu23 wrote:

    I have no idea what this article was about ??

  • Report this Comment On May 08, 2012, at 10:41 AM, VickieDayton wrote:

    There is no new information here, as usual. The decline has been going on for a long time but now it's safe for Motley Fool to state the obvious. Six weeks after it sets a new high MF will come along with an article noting that the stock has been moving up.

  • Report this Comment On May 08, 2012, at 10:50 AM, MannRamona wrote:

    just as Gerald answered I am impressed that a single mom can get paid $4418 in a few weeks on the internet. did you read this web site (Click on menu Home more information) http://goo.gl/fn4r7

Add your comment.

Sponsored Links

Leaked: Apple's Next Smart Device
(Warning, it may shock you)
The secret is out... experts are predicting 458 million of these types of devices will be sold per year. 1 hyper-growth company stands to rake in maximum profit - and it's NOT Apple. Show me Apple's new smart gizmo!

DocumentId: 1879774, ~/Articles/ArticleHandler.aspx, 10/22/2014 6:03:35 AM

Report This Comment

Use this area to report a comment that you believe is in violation of the community guidelines. Our team will review the entry and take any appropriate action.

Sending report...


Advertisement