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Farm-products retailer and potash miner Agrium Inc. (AGU-T) posted a bigger than expected quarterly profit Wednesday due to strong fertilizer demand, but shares fell as it offered a slightly weaker financial forecast.
High prices for crops such as corn in the first quarter spurred demand for fertilizer, supporting prices of crop nutrients, as farmers looked to maximize profits, said analyst Edlain Rodriguez of Gleacher & Co.
"It's a continuation of what we've seen the past few quarters where the ag market is extremely strong," he said.
Calgary, Alberta-based Agrium's shares fell in New York and Toronto, however, as the company's financial forecasts for the first half included a slightly weaker outlook for the second quarter than analysts had expected.
The weakness in fertilizer stocks likely reflects Wednesday's lower commodity prices, especially copper, which is often seen as a bellwhether for the economy, said analyst Raymond Goldie of Salman Partners Inc.
The selloff of Agrium stock seems overdone, he said. "They actually came through in the first quarter better than expected."
Wet conditions in parts of the U.S. Midwest, which have slowed planting of corn, a crop that uses large amounts of fertilizer, may also have weakened fertilizer stocks.
Agrium said it expects to post diluted earnings of $4.40 to $4.90 US per share for the first half of 2011. The average consensus estimate was within that range, but at the upper end.
Agrium, the largest North American farm products retailer, posted consolidated net income of $171 million, or $1.09 per share, for the first quarter, compared with a net loss of $1 million, or 1 cent a share, a year earlier.
Analysts on average had forecast earnings of 92 cents a share on revenue of $2.35 billion, according to Thomson Reuters I/B/E/S.
"Record high crop prices and overall strong fundamentals for agriculture and the crop input market provided the basis for Agrium's outstanding quarter, particularly in light of a slow start to the spring season," the company said in a statement. It reported a 91 percent rise in crop nutrient sales in the quarter.
"Crop nutrient demand was strong in North America and globally, providing underlying support to crop nutrient prices," it said.
Excluding a pretax share-based payment expense and a pretax gain, its first-quarter profit was $1.03 a share.
Agrium said sales rose 60 percent to $2.95 billion.
Last week, rival Potash Corp., the world's largest fertilizer maker, reported a higher quarterly profit that also topped expectations, as soaring grain prices boosted demand and prices for crop nutrients.
In December, Agrium agreed to sell the commodity management business it had acquired as part of its $1.24 billion (AUD) purchase of Australia's AWB Ltd to U.S. agribusiness and trading giant Cargill Inc
Cargill has received clearance from Australia's Foreign Investment Review Board for the acquisition, the companies said Wednesday.