Agrium Earnings: An Early Look

Earnings season is now starting to wind down, with most companies already having reported their quarterly results. But there are still some companies left to report, and Agrium (NYSE: AGU  ) is about to release its quarterly earnings report. The key to making smart investment decisions with stocks releasing their quarter reports is to anticipate how they'll do before they announce results, leaving you fully prepared to respond quickly to whatever inevitable surprises arise. That way, you'll be less likely to make an uninformed knee-jerk reaction to news that turns out to be exactly the wrong move.

Agrium isn't the best-known play in the fertilizer space, but it is one of the most diversified, having exposure to both nitrogen-based and potash fertilizer production. Let's take an early look at what's been happening with Agrium over the past quarter and what we're likely to see in its quarterly report on Friday.

Stats on Agrium

Analyst EPS Estimate

$2.00

Change From Year-Ago EPS

(14.5%)

Revenue Estimate

$3.20 billion

Change From Year-Ago Revenue

0.6%

Earnings Beats in Past 4 Quarters

3

Source: Yahoo! Finance.

Will Agrium get its growth going this quarter?
Analysts have been extremely bullish on Agrium's prospects for the just-ended quarter, having boosted their consensus estimates by more than $0.30 per share in just the past month. Investors have also been optimistic, and the stock has risen more than 12% since mid-November.

That rise in analyst estimates came when Agrium pre-announced guidance for its fourth quarter back in January, raising its call from a range of $1.50-$1.90 per share based on high prices for grain and oilseed. Moreover, pointing to low inventories of grain worldwide, CEO Mike Wilson anticipated continued strength in 2013.

Agrium has already seen some of the benefits from fertilizer demand. Near the beginning of the year, Agrium, along with partners PotashCorp (NYSE: POT  ) and Mosaic (NYSE: MOS  ) , entered into an agreement with Sinofert Holdings to provide potash-based fertilizer to China. Although the $400-per-ton price was well below the previous contract's price of $470, the deal should help get rid of a glut of potash on the market.

What sets Agrium apart from Mosaic and PotashCorp is its nitrogen-fertilizer production. Along with nitrogen-focused Terra Nitrogen (NYSE: TNH  ) and CVR Partners (NYSE: UAN  ) , Agrium has used cheap natural gas to reduce its costs. Yet Agrium goes further by giving its customers a choice among different types of fertilizer depending on what market offers better value at any given time. That flexibility will also help Agrium outperform Terra and CVR when natural-gas prices rise in the future.

But Agrium is facing a company-specific challenge in the form of a fight with an activist investor. Hedge fund JANA Partners wants the company to consolidate its retail store network and spin off the retail business, and to boost its dividend rather than reinvesting cash into its business. Agrium argues that its strong stock performance speaks for itself, but JANA thinks the company could have done even better by following its advice.

In Agrium's earnings report, watch for how the company responds to JANA's challenge. Shareholders could benefit if the company implements even part of the hedge fund's recommendations, even if it spurns a closer relationship with JANA going forward.

Can Agrium beat out PotashCorp?
With its double-fertilizer approach, Agrium looks strong. But as the global leader in potash production, PotashCorp will put up a big fight against Agrium. Find out more by reading our premium research report on PotashCorp, which covers several key reasons why this company presents such a compelling investment opportunity today. Click here now to access your report today.

Click here to add Agrium to My Watchlist, which can find all of our Foolish analysis on it and all your other stocks.


Read/Post Comments (0) | Recommend This Article (0)

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.

Be the first one to comment on this article.

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: 2268690, ~/Articles/ArticleHandler.aspx, 10/25/2014 7:20:36 PM

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...

Apple's next smart device (warning, it may shock you

Apple recently recruited a secret-development "dream team" to guarantee its newest smart device was kept hidden from the public for as long as possible. But the secret is out. In fact, ABI Research predicts 485 million of this type of device will be sold per year. But one small company makes Apple's gadget possible. And its stock price has nearly unlimited room to run for early-in-the-know investors. To be one of them, and see Apple's newest smart gizmo, just click here!


Advertisement