Is a Win for Potash Corp. a Win for All Players in Fertilizer and Potash?

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It is always interesting to see what happens to peer companies after an industry leader either catches a key analyst upgrade or gets prominently featured positively in the media. This is particularly the case if most of the shares in the sector have been bruised. A weekend feature in Barron’s highlighted the potential value in Potash Corporation of Saskatchewan Inc. (NYSE: POT) now that its shares have pulled back.

Without rehashing or trying to second guess the report, what was perhaps more than interesting was to see that the gains in Potash Corp. were also being seen in rival companies. And many of these outfits are trading down massively from their 52-week highs.

Potash Corporation of Saskatchewan shares were up 2.4% at $26.64 late on Monday. It had traded 5.7 million shares, about 25% more than an average day’s volume during a time when total market volume is light. Potash Corp. of Saskatchewan has a consensus analyst price target of $32.59 and a 52-week range of $25.82 to $37.60. Its dividend yield is listed as being over 5% now, and it has a $22 billion market cap.

The Mosaic Company (NYSE: MOS) was up 1.2% late on Monday at $43.80. Its consensus analyst price target feels far too high as $84 or so, but it has a 52-week range of $40.32 to $53.83. Mosaic pays a 2.5% yield. Mosaic has a $15 billion market value.

Intrepid Potash, Inc. (NYSE: IPI) was also seeing a 1.1% gain late on Monday. At $8.17, its 52-week range is $7.91 to $16.77 and its consensus analyst price target is $10.05. It has a much smaller market value at $623 million.

The Barron’s report highlighted that Potash Corp. would win if fertilizer prices stabilize in the next year. That would be true for any and all players in potash and fertilizer most likely. It was also noted as still generating positive cash flows and Barron’s pointed out a prior JPMorgan article showing that Potash Corp could be worth $34 per share — or up to $52 per share in a replacement value.

There is a common element here among most potash and fertilizer players. If they are not involved in a merger, they are closer to 52-week lows rather than 52-week highs. Many of these are trading at a fraction of their former highs.