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Potash Corp. posted a profit of $59 million or 7 cents per share in fourth-quarter 2016, declining roughly 70.6% from $201 million or 24 cents per share it earned a year ago. Earnings per share for the reported quarter missed the Zacks Consensus Estimate of 9 cents.
Net sales for the quarter declined 25.5% year over year to $928 million and missed the Zacks Consensus Estimate of $1,028 million.
Segment Review
Potash: Potash gross margin was $120 million in the reported quarter, down from $183 million in the year-ago period due to lower-price environment. Sales volumes for the segment were 2.2 million tons, up 27% year over year. Average realized potash price was $157 per ton, down from the $238 per ton figure recorded in the year-ago quarter. This decline is attributed to the fall in spot prices witnessed in the first half of 2016 and lower contract prices settled in the second half.
Nitrogen: Gross margin was $55 million in the reported quarter, down from $142 million in the year-ago quarter due to weaker prices. Sales volumes for the quarter were 1.6 million tons, modestly higher than the year-ago recorded figure, mainly due to stronger demand for nitrogen solutions relative to ammonia. Average realized price of $182 per ton during the quarter was down considerably from the $288 per ton achieved in the year-ago quarter. The decline was due to the result of lower global energy costs and increased supply of nitrogen products.
Phosphate: Sales volumes declined to 0.7 million tons from the year-ago figure of 0.8 million tons due to weaker demand for feed and industrial products. Gross margin of $8 million for the quarter was significantly lower than the 2015 level. Average realized phosphate price for the quarter was $404 per ton, down from $522 per ton recorded in the year-ago period, owing to weaker fertilizer realizations.
Financials
Potash Corp.’s cash and cash equivalents were $32 million as of Dec 31, 2016 compared with $91 million as of Dec 31, 2015. As of Dec 31, 2016, long-term debt was $3,707 million compared with the year-age figure of $3,710 million.
Guidance
Potash Corp. expects full-year 2017 earnings to be in the range of 35 cents to 55 cents per share that includes merger related charges of 5 cents per share. The company expects total potash sales volume to be in the range of 8.7–9.4 million tons in 2017. It projects potash gross margin of $550-$800 million for the year.
Capital expenditures for the year are projected at $600 million.
Potash Corp. expects combined gross margin for nitrogen and phosphate in the band of $150–$400 million for 2017.
The company expects effective income tax rate in the range of 17–20% and selling and administrative expenses in the range of $225 million–$235 million for 2017.
Outlook
Potash Corp. has underperformed the Zacks categorized Fertilizers industry over the past three months. While the company’s shares gained 15% over this period, the industry recorded a gain of 20%.
The company faces challenging agriculture market fundamentals and headwinds associated with a weak pricing environment. However, Potash Corp. is expected to benefit from expanded operational capability and improved demand for potash. The proposed merger with Agrium is also expected to create significant cost and operational synergies.
Potash Corporation of Saskatchewan Inc. Price, Consensus and EPS Surprise
Potash Corp. currently holds a Zacks Rank #3 (Hold).
Some better-ranked companies in the basic materials space include BASF SE (BASFY - Free Report) , Scotts Miracle-Gro Company (SMG - Free Report) and Albermale Corp. (ALB - Free Report) .
BASF has a long-term expected earnings growth rate of 7.7% and carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Scotts Miracle-Gro has a long-term expected earnings growth rate of 12.1% and carries a Zacks Rank #2 (Buy).
Albermale has a long-term expected earnings growth rate of 10% and carries a Zacks Rank #2.
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Potash Corp. (POT) Misses Q4 Earnings, Revenue Estimates
Potash Corp. posted a profit of $59 million or 7 cents per share in fourth-quarter 2016, declining roughly 70.6% from $201 million or 24 cents per share it earned a year ago. Earnings per share for the reported quarter missed the Zacks Consensus Estimate of 9 cents.
Net sales for the quarter declined 25.5% year over year to $928 million and missed the Zacks Consensus Estimate of $1,028 million.
Segment Review
Potash: Potash gross margin was $120 million in the reported quarter, down from $183 million in the year-ago period due to lower-price environment. Sales volumes for the segment were 2.2 million tons, up 27% year over year. Average realized potash price was $157 per ton, down from the $238 per ton figure recorded in the year-ago quarter. This decline is attributed to the fall in spot prices witnessed in the first half of 2016 and lower contract prices settled in the second half.
Nitrogen: Gross margin was $55 million in the reported quarter, down from $142 million in the year-ago quarter due to weaker prices. Sales volumes for the quarter were 1.6 million tons, modestly higher than the year-ago recorded figure, mainly due to stronger demand for nitrogen solutions relative to ammonia. Average realized price of $182 per ton during the quarter was down considerably from the $288 per ton achieved in the year-ago quarter. The decline was due to the result of lower global energy costs and increased supply of nitrogen products.
Phosphate: Sales volumes declined to 0.7 million tons from the year-ago figure of 0.8 million tons due to weaker demand for feed and industrial products. Gross margin of $8 million for the quarter was significantly lower than the 2015 level. Average realized phosphate price for the quarter was $404 per ton, down from $522 per ton recorded in the year-ago period, owing to weaker fertilizer realizations.
Financials
Potash Corp.’s cash and cash equivalents were $32 million as of Dec 31, 2016 compared with $91 million as of Dec 31, 2015. As of Dec 31, 2016, long-term debt was $3,707 million compared with the year-age figure of $3,710 million.
Guidance
Potash Corp. expects full-year 2017 earnings to be in the range of 35 cents to 55 cents per share that includes merger related charges of 5 cents per share. The company expects total potash sales volume to be in the range of 8.7–9.4 million tons in 2017. It projects potash gross margin of $550-$800 million for the year.
Capital expenditures for the year are projected at $600 million.
Potash Corp. expects combined gross margin for nitrogen and phosphate in the band of $150–$400 million for 2017.
The company expects effective income tax rate in the range of 17–20% and selling and administrative expenses in the range of $225 million–$235 million for 2017.
Outlook
Potash Corp. has underperformed the Zacks categorized Fertilizers industry over the past three months. While the company’s shares gained 15% over this period, the industry recorded a gain of 20%.
The company faces challenging agriculture market fundamentals and headwinds associated with a weak pricing environment. However, Potash Corp. is expected to benefit from expanded operational capability and improved demand for potash. The proposed merger with Agrium is also expected to create significant cost and operational synergies.
Potash Corporation of Saskatchewan Inc. Price, Consensus and EPS Surprise
Potash Corporation of Saskatchewan Inc. Price, Consensus and EPS Surprise | Potash Corporation of Saskatchewan Inc. Quote
Zacks Rank & Key Picks
Potash Corp. currently holds a Zacks Rank #3 (Hold).
Some better-ranked companies in the basic materials space include BASF SE (BASFY - Free Report) , Scotts Miracle-Gro Company (SMG - Free Report) and Albermale Corp. (ALB - Free Report) .
BASF has a long-term expected earnings growth rate of 7.7% and carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Scotts Miracle-Gro has a long-term expected earnings growth rate of 12.1% and carries a Zacks Rank #2 (Buy).
Albermale has a long-term expected earnings growth rate of 10% and carries a Zacks Rank #2.
How would you like to see our best recommendations to help you find today’s most promising long-term stocks? Starting now, you can look inside our portfolios featuring stocks under $10, income stocks, value investments and more. These picks, which have double and triple-digit profit potential, are rarely available to the public. But you can see them now. Click here >>