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Potash Corp (POT): Will its Earnings Disappoint in Q2?
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Potash Corp. of Saskatchewan, Inc. is set to release second-quarter 2016 results before the opening bell on Jul 28.
In the last quarter, the fertilizer giant delivered a negative earnings surprise of 6.25%. Its profit tumbled in the quarter, hurt by lower fertilizer prices and weak sales volume.
Potash Corp. has missed the Zacks Consensus Estimate in the trailing four quarters with an average negative surprise of 10.16%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Potash Corp., in its last earnings call, said that it sees potash gross margin of $0.5−$0.7 billion for 2016, down considerably from the 2015 level as well as its previous guidance. The lowered projection is due to the carryover of weak prices as well as demand from the first quarter weighing on results for the rest of the year.
Phosphate and nitrogen also faced challenging market conditions, including lower prices, in the first quarter of 2016. Although operating rates and volumes improved and costs were lowered, weak pricing is expected to reduce nitrogen margin. Management does not anticipate much change in the phosphate market currently and expects it to remain flat.
Potash Corp. expects full-year 2016 earnings in the range of 60−90 cents per share and second-quarter earnings of 15−25 cents per share. The annual guidance has been lowered to account for the lowered margin expectations. The guidance reflects the challenging market conditions that the company currently operates under but also includes the improvement that management is confident of.
Potash Corp. is faced with macroeconomic uncertainties and other issues such as price volatility. Depressed crop pricing has created uncertainty about potash consumption. The company has decided to lower potash production due to the weak demand in the market. The company’s Piccadilly, New Brunswick facility was suspended indefinitely at the beginning of the year. While the action is not expected to improve earnings in the short term, it will likely have a positive impact in the medium and long term. The company has also been facing earnings headwinds from tax changes.
Potash Corp. is also looking to optimize costs. The company is focusing on its low cost production facility at Rocanville. The expansion plans are at the final stage at the facility and production is expected to ramp up later in the year.
Although management expects the rest of 2016 to see an improvement in the macro environment, the company remains exposed to a challenging pricing environment which may weigh on its June quarter results.
Our proven model does not conclusively show that Potash Corp. is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Potash Corp. is currently pegged at -5.56%. This is because the Most Accurate Estimate stands at 17 cents while the Zacks Consensus Estimate is pegged at 18 cents.
Zacks Rank: Potash Corp. carries a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some companies in the basic materials sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Huntsman Corporation (HUN - Free Report) has an Earnings ESP of +7.84% and a Zacks Rank #1 (Strong Buy).
FMC Corp (FMC - Free Report) has an Earnings ESP of +4.48% and a Zacks Rank #2 (Buy).
Ingevity Corporation (NGVT - Free Report) has an Earnings ESP of +3.92% and a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>
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Potash Corp (POT): Will its Earnings Disappoint in Q2?
Potash Corp. of Saskatchewan, Inc. is set to release second-quarter 2016 results before the opening bell on Jul 28.
In the last quarter, the fertilizer giant delivered a negative earnings surprise of 6.25%. Its profit tumbled in the quarter, hurt by lower fertilizer prices and weak sales volume.
Potash Corp. has missed the Zacks Consensus Estimate in the trailing four quarters with an average negative surprise of 10.16%. Let’s see how things are shaping up for this announcement.
Factors to Consider
Potash Corp., in its last earnings call, said that it sees potash gross margin of $0.5−$0.7 billion for 2016, down considerably from the 2015 level as well as its previous guidance. The lowered projection is due to the carryover of weak prices as well as demand from the first quarter weighing on results for the rest of the year.
Phosphate and nitrogen also faced challenging market conditions, including lower prices, in the first quarter of 2016. Although operating rates and volumes improved and costs were lowered, weak pricing is expected to reduce nitrogen margin. Management does not anticipate much change in the phosphate market currently and expects it to remain flat.
Potash Corp. expects full-year 2016 earnings in the range of 60−90 cents per share and second-quarter earnings of 15−25 cents per share. The annual guidance has been lowered to account for the lowered margin expectations. The guidance reflects the challenging market conditions that the company currently operates under but also includes the improvement that management is confident of.
Potash Corp. is faced with macroeconomic uncertainties and other issues such as price volatility. Depressed crop pricing has created uncertainty about potash consumption. The company has decided to lower potash production due to the weak demand in the market. The company’s Piccadilly, New Brunswick facility was suspended indefinitely at the beginning of the year. While the action is not expected to improve earnings in the short term, it will likely have a positive impact in the medium and long term. The company has also been facing earnings headwinds from tax changes.
Potash Corp. is also looking to optimize costs. The company is focusing on its low cost production facility at Rocanville. The expansion plans are at the final stage at the facility and production is expected to ramp up later in the year.
Although management expects the rest of 2016 to see an improvement in the macro environment, the company remains exposed to a challenging pricing environment which may weigh on its June quarter results.
POTASH SASK Price and EPS Surprise
POTASH SASK Price and EPS Surprise | POTASH SASK Quote
Earnings Whispers
Our proven model does not conclusively show that Potash Corp. is likely to beat estimates this quarter. This is because a stock needs to have both a positive Earnings ESP and a Zacks Rank #1, 2 or 3 for this to happen. This is not the case here, as you will see below:
Zacks ESP: Earnings ESP for Potash Corp. is currently pegged at -5.56%. This is because the Most Accurate Estimate stands at 17 cents while the Zacks Consensus Estimate is pegged at 18 cents.
Zacks Rank: Potash Corp. carries a Zacks Rank #5 (Strong Sell). We caution against stocks with a Zacks Rank #4 or 5 (Sell-rated stocks) going into the earnings announcement, especially when the company is seeing negative estimate revisions.
Stocks that Warrant a Look
Here are some companies in the basic materials sector you may want to consider as our model shows that these have the right combination of elements to post an earnings beat this quarter:
Huntsman Corporation (HUN - Free Report) has an Earnings ESP of +7.84% and a Zacks Rank #1 (Strong Buy).
FMC Corp (FMC - Free Report) has an Earnings ESP of +4.48% and a Zacks Rank #2 (Buy).
Ingevity Corporation (NGVT - Free Report) has an Earnings ESP of +3.92% and a Zacks Rank #3 (Hold).
Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report >>