Potash Sales & Demand Remain Weaker Longer (POT, MOS)

Potash Corp. of Saskatchewan, Inc. (NYSE: POT) appears to have the fertilizer and potash sector off to some concerns during earnings season.  The culprit appears to be weaker than expected demand followed by soft pricing.  While shares had been weak ahead of earnings, selling is the trend.

Earnings came in at $0.56 EPS versus Thomson Reuters expectations of $0.63 EPS.  The drop was 33% in raw earnings based on lower sales and volumes meeting higher operating costs per output unit. The company’s CEO noted that demand has taken longer to surface than it originally expected earlier this year, but he does expect that demand will accelerate through the rest of 2012.  Weaker potash prices have been seen based on lower demand and based on higher competition.

As far as guidance for the second quarter, the company sees earnings in a range of $0.90 to $1.10 EPS against estimates of $1.07 EPS.  The company is also lowering its fiscal 2012 annual earnings target to $3.20 to $3.60 per share from a prior range offered of $3.40 to $4.00 in earnings per share.  The top of the range is now under the $3.61 or so consensus target.

Potash Corp. (NYSE: POT) shares are indicated down about 2.3% at $43.25 against a 52-week range of $38.42 to $62.60 and the weakness appears to be elsewhere in competitors.  The Mosaic Company (NYSE: MOS) has not traded but the bid/ask range is indicated lower than the $53.20 close and its stock has been weak as well.

JON C. OGG