Agrium Incorporated

Agrium Inc. (AGU - Analyst Report), the agriculture and fertilizer company, has traded sharply lower since we last reviewed it on Sep 11. Last week's downturn was the result of a sell-off in the commodities-related stocks as well as an earnings miss by competitor Mosaic (MOS - Snapshot Report).

What does this mean for Agrium?

Agrium has three business segments: fertilizers, the retail segment, which sells seeds and fertilizers to farmers, and the advanced technologies segment.

It is Agrium's fertilizer segment that has come under fire after Mosaic's earnings. Mosaic said it was reducing its phosphate production due to rising inventory but the company believes phosphate fundamentals remain positive and that demand is expected to rebound once inventory levels are normalized.

As we wrote on Sep 11, the strike at Potash of Saskatchewan (POT - Analyst Report) is severely impeding potash inventory levels. Potash supply was at record low levels in August and Mosaic said strong global demand continues.

Until the Potash strike is settled, Potash prices should remain extremely elevated. This is a positive for Agrium.

Agrium's CFO talked to Reuters last week after the stock plunged.

"I think it's just a lot of panic in the market right now and the market is very, very skittish, and any hint of even a possibility of bad news seems to generate a huge overreaction," said CFO Bruce Waterman.

"What it really comes down to is no individual company can stand up to a tidal wave of panic selling," he said.

Value Fundamentals Intact

Agrium remains a Zacks #1 Rank (Strong Buy) but one analyst cut full year estimates in the last 30 days. However, consensus estimates remain higher for the third quarter and the full year in the last month.

Because of the sell-off, Agrium is cheap. Its forward P/E is now only 3.51. However, we won't get a clearer picture on the underlying business until Agrium reports third quarter earnings on Nov 6. Until then, the fertilizer sector could continue to be rocky for investors.

Read the Sep 11 analysis.

Update to Previous Value Zacks Rank Buy Stocks

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