The differentiating factor between the good performers and the not-so-good has been the type of fertilizer each company produces. Demand for nitrogen-based fertilizers is expected to grow throughout this year, positioning the two largest nitrogen produces at the top of Credit Suisse’s heap. Phosphate demand is also expected to be higher, but potash prices have been soft and there is little evidence of a positive change.
Credit Suisse analyst Chris Parkinson pointed to market growth in ag biotech, higher demand for potash in the second half of 2013 and continuing demand for phosphates as the drivers for 2013. Here are the firm’s seven covered stocks:
Agrium Inc. (NYSE: AGU) is started with an Outperform rating and a price target of $127 a share. With a current price around $108, the potential upside is 17.6%. Agrium is the largest producer of nitrogen fertilizers among this bunch and depends more on phosphates than potash for revenue and profit.
Monsanto Co. (NYSE: MON) is also started with an Outperform rating, as well as a price target of $120 a share. The shares are trading around $102 today, indicating upside of 17.6%. Monsanto’s strength is its market-leading seed genetics platform and its penetration into emerging markets.
Potash Corp. of Saskatchewan Inc. (NYSE: POT) is the third fertilizer maker started with an Outperform rating. The price target is $50, compared with today’s price of around $42, for an upside of 19%. Credit Suisse sees demand for potash fertilizer growing in the second and third quarters on demand from southeast Asia and Latin America.
The Mosaic Co. (NYSE: MOS) is started as Neutral with a price target of $68. At today’s price of around $59, that represents upside of 15%. The much higher consensus price target for Mosaic is around $84.50.
CF Industries Holding Inc. (NYSE: CF) is started as Neutral with a price target of $245, compared with current price of around $217. The upside potential is about 13%, and the consensus price target is lower, at around $234 a share.
Intrepid Potash Inc. (NYSE: IPI) is also started as Neutral with a price target of $24 a share. The current price is around $22, for potential upside of 9%. Shares are already pretty fully valued, so not much to look for here.
Compass Minerals International Inc. (NYSE: CMP) is started as Underperform with a price target of $73, which is virtually today’s price. The company is lowering its costs, but there is always a risk that cost-cutting programs will get derailed.
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