PotashCorp/Saskatchewan (USA) Earnings: Will Tough Times Continue?

Painful drops in revenue and earnings could last a while longer, but will PotashCorp eventually bounce back?

Apr 22, 2014 at 2:10PM

On Thursday, Potash Corp. of Saskatchewan (NYSE:POT) will release its quarterly report, and investors are bracing for yet another difficult comparison that will show a huge drop in revenue and earnings from year-ago levels. Yet even though PotashCorp and peers Mosaic (NYSE:MOS) and Agrium (NYSE:AGU) face many similar challenges in dealing with the devastation in the potash market, PotashCorp arguably remains the most exposed to future prospects for potash fertilizers in the long run.

PotashCorp crashed last year after producers in Russian and Belarus broke up their alliance, leading to a plunge in potash prices that had ripple effects throughout the industry. Since then, potash prices have struggled for traction, and uncertainty about whether major players in potash production might once again unite to help control prices made it hard for investors to judge the likelihood that PotashCorp could rebound. With rumors of a potential takeover, will PotashCorp survive as an independent entity long enough to see better times? Let's take an early look at what's been happening with PotashCorp over the past quarter and what we're likely to see in its report.

Pot
Source: PotashCorp.

Stats on PotashCorp

Analyst EPS Estimate

$0.35

Change From Year-Ago EPS

(44%)

Revenue Estimate

$1.49 billion

Change From Year-Ago Revenue

(24%)

Earnings Beats in Past 4 Quarters

1

Source: Yahoo! Finance.

What's next for PotashCorp earnings?
In recent months, analysts have yet again cut their views on PotashCorp earnings, cutting their estimates for the most recent period by a quarter and reducing their full-year 2014 projections by $0.35 per share. The stock has stayed stuck in the mud, rising less than 2% since mid-January.

PotashCorp's fourth-quarter earnings showed just how hard the company has been hit by adverse conditions in the fertilizer market. Profits fell 46% from the year-ago quarter as realized potash prices fell to $280 per ton, and PotashCorp had to take drastic measures to cut costs, including cutting nearly a fifth of its workforce and cutting back on higher-cost production in order to keep margins as wide as possible. Yet given that PotashCorp relies much more heavily on potash than Mosaic and Agrium, even those measures weren't enough for PotashCorp to avoid having to cut its earnings guidance for the remainder of 2014, sending shares downward.

PotashCorp has had to deal with mixed news recently. On one hand, a Uralkali deal with China set potash prices at $305 per ton, which many hope will mark a floor for the entire industry for the near future. Yet in February, news that India's fertilizer ministry could cut potash subsidies by 20% threw cold water on bullish sentiment, as India has been a key partner with PotashCorp, Mosaic, and Agrium as members of the Canpotex marketing group.

Pot

Export terminal. Source: Canpotex.

One wildcard for PotashCorp comes from the conflict between Ukraine and Russia. If economic sanctions led to a disruption in supplies from Russia's Uralkali, then it could cause at least a short-term price spike for potash, to the benefit of PotashCorp and its peers. Yet the real concern is whether China, which is a key source of demand for potash, would actually comply with economic sanctions against Russia. Without China's compliance, the impact on world-market prices would be far less.

PotashCorp's future depends largely on what happens among suppliers. Some believe that Uralkali and Belaruskali could renew their previous agreement, which would presumably send potash prices back up. Others have pointed to a possible acquisition of PotashCorp by BHP Billiton, which unsuccessfully tried to buy PotashCorp several years ago.

In the PotashCorp earnings report, watch to see how the company is dealing with low potash prices. For the stock to fare well, PotashCorp has to keep working on reducing costs in order to make the most of a low-margin environment.

Three stocks poised to be multibaggers
The one sure way to get wealthy is to invest in a groundbreaking company that goes on to dominate a multibillion-dollar industry. Our analysts have found multibagger stocks like Netflix time and again. And now they think they've done it again with three stock picks that they believe could generate the same type of phenomenal returns. They've revealed these picks in a new free report that you can download instantly by clicking here now.

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

Dan Caplinger has no position in any stocks mentioned. The Motley Fool owns shares of PotashCorp. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.

Money to your ears - A great FREE investing resource for you

The best way to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as “binge-worthy finance.”

Feb 1, 2016 at 5:03PM

Whether we're in the midst of earnings season or riding out the market's lulls, you want to know the best strategies for your money.

And you'll want to go beyond the hype of screaming TV personalities, fear-mongering ads, and "analysis" from people who might have your email address ... but no track record of success.

In short, you want a voice of reason you can count on.

A 2015 Business Insider article titled, "11 websites to bookmark if you want to get rich," rated The Motley Fool as the #1 place online to get smarter about investing.

And one of the easiest, most enjoyable, most valuable ways to get your regular dose of market and money insights is our suite of free podcasts ... what we like to think of as "binge-worthy finance."

Whether you make it part of your daily commute or you save up and listen to a handful of episodes for your 50-mile bike rides or long soaks in a bubble bath (or both!), the podcasts make sense of your money.

And unlike so many who want to make the subjects of personal finance and investing complicated and scary, our podcasts are clear, insightful, and (yes, it's true) fun.

Our free suite of podcasts

Motley Fool Money features a team of our analysts discussing the week's top business and investing stories, interviews, and an inside look at the stocks on our radar. The show is also heard weekly on dozens of radio stations across the country.

The hosts of Motley Fool Answers challenge the conventional wisdom on life's biggest financial issues to reveal what you really need to know to make smart money moves.

David Gardner, co-founder of The Motley Fool, is among the most respected and trusted sources on investing. And he's the host of Rule Breaker Investing, in which he shares his insights into today's most innovative and disruptive companies ... and how to profit from them.

Market Foolery is our daily look at stocks in the news, as well as the top business and investing stories.

And Industry Focus offers a deeper dive into a specific industry and the stories making headlines. Healthcare, technology, energy, consumer goods, and other industries take turns in the spotlight.

They're all informative, entertaining, and eminently listenable. Rule Breaker Investing and Answers are timeless, so it's worth going back to and listening from the very start; the other three are focused more on today's events, so listen to the most recent first.

All are available for free at www.fool.com/podcasts.

If you're looking for a friendly voice ... with great advice on how to make the most of your money ... from a business with a lengthy track record of success ... in clear, compelling language ... I encourage you to give a listen to our free podcasts.

Head to www.fool.com/podcasts, give them a spin, and you can subscribe there (at iTunes, Stitcher, or our other partners) if you want to receive them regularly.

It's money to your ears.

 


Compare Brokers