Zacks Investment Research downgraded Potash Corporation of Saskatchewan Inc. POT to a Zacks Rank #5 (Strong Sell) on Nov 19.
Why the Downgrade?
Potash Corp. posted a profit of $282 million or 34 cents per share in the third quarter of 2015, a roughly 11% fall from $317 million or 38 cents per share earned a year ago. Earnings also missed the Zacks Consensus Estimate of 38 cents.
Revenues for the quarter (as adjusted) slipped 6.6% year over year to $1,401 million and missed the Zacks Consensus Estimate of $1,482 million.
The company cut its sales volume guidance to a range of 9-9.2 million tons and expects gross margin of $1.4-$1.5 billion, reflecting weaker volumes and pricing. The company also reduced its 2015 earnings guidance to the range of $1.55-$1.65 per share from $1.75-$1.95 per share expected earlier.
Potash Corp. remains exposed to macroeconomic uncertainties and other issues such as price volatility and currency exchange fluctuation. Sluggishness across certain developing markets is affecting the global outlook. Expected reduction in planted acres for corn in North America along with depressed crop pricing has created an uncertainty on potash consumption. Moreover, a challenging currency environment coupled with economic weakness has contributed to a sluggish demand environment for potash in specific emerging markets.
The company also remains exposed to a volatile pricing environment. Potash pricing is expected to remain under pressure moving ahead. Higher supply, reduced global energy prices and modestly softer agricultural fundamentals have contributed to a more tempered nitrogen pricing environment this year. Weak pricing is expected to lead to lower nitrogen margin in 2015. Moreover, nitrogen sales volumes are expected to be lower this year on a year-over-year basis due to weaker demand in North America, lower production as a result of mechanical challenges and an expansion-related turnaround.
Potash Corp. will also face earnings headwinds from changes in the tax rate. The amendments to potash taxation in conjunction with the government of Saskatchewan's 2015-16 provincial budget are expected to reduce the company's 2015 pre-tax earnings. Changes in timing of deduction for expansion and maintenance spending in Saskatchewan will significantly impact earnings in 2015 and to a lesser extent in 2016 as the company winds down its capital expansion projects and incurs increased maintenance capital spending as a result of these expansions.
Other Stocks to Consider
I agree with much of what you say, I have a substantial investment in SIRI and have been here since the late 90's.. I really like the way its been behaving.
NVESTOR ALERT: Levi & Korsinsky, LLP Notifies Shareholders of Ocata Therapeutics, Inc. of Commencement of an Investigation In Connection With the Fairness of the Sale of the Company to Astellas Pharma Inc.