NEW YORK — Shares of several agricultural fertilizer producers jumped to new 52-week highs Monday, after Citigroup said Wall Street's earnings expectations for the industry aren't keeping pace with sharply rising corn and wheat prices.
Analyst Brian Yu upgraded CF Industries Holdings Inc. to "Buy" from "Hold," while boosting his target prices for competitors Agrium Inc., Mosaic Co., Potash Corp. of Saskatchewan and Terra Industries Inc.
In a research report, Yu said shares of his Fert-Index are up about 53 percent year to date, compared with a 12 percent rise for the overall S&P 500 index. The stocks, though, have more room to grow, he wrote, as he expects earnings to accelerate in 2007.
He said the Street's overall outlook for industry earnings has remained relatively flat since the year's beginning, and they're not keeping up with the price increases of between 38 percent and 63 percent for wheat and corn.
"Over the past several years industry earnings estimates have generally trended with grain prices, but that has not been the case so far this year and one could argue that there is still room for earnings estimates to move higher," he wrote. "We believe estimates are lagging because of spillover from a painful 2005/06 demand year and the fact that overall U.S. fall demand has been uninspiring thus far."
Yu raised his target price for CF Industries to $26 from $19.50 on higher earnings expectations. He also boosted his estimate for 2006 operating earnings per share to $1.01 from 76 cents and his 2007 estimate to $1.27 from 80 cents.
Wall Street overall, on average, had been looking for earnings per share of 72 cents for 2006 and $1.03 for 2007, according to an analyst poll by Thomson Financial.
Shares of the Long Grove, Ill.-based company jumped 79 cents, or 3.6 percent, to $22.48 in afternoon trading on the New York Stock Exchange. The stock set a new 52-week high of $22.75 earlier in the session, topping its prior high of $21.88 set earlier this month.
Yu increased his target price for Agrium to $36 from $32 after raising his 2007 earnings estimate to $2 per share from $1.95. Analysts overall had been looking for $2.06 per share.
U.S.-listed shares of the Canada-based company gained 10 cents to $30.15 on the NYSE. The stock set a new 52-week high of $30.75 earlier in the session, topping its prior high of $30.40 set earlier this month.
The analyst lifted his target price for Mosaic to $25.50 from $23 as he raised his fiscal 2007 profit estimate to 92 cents per share from 88 cents. Wall Street overall had been looking for 82 cents per share.
Shares of the Plymouth, Minn.-based company rose 38 cents to $21.32 on the NYSE. The stock earlier in the session reached a new 52-week high of $21.56, topping its prior high of $21.42 set earlier this month.
Yu raised his target price for Potash Corp. of Saskatchewan to $160 from $140, and increased his estimate for 2007 earnings per share to $7.65 from $6.80. Analysts had been looking for $6.93.
The Canada-based company's U.S.-listed shares rose 48 cents to $137.82 on the NYSE, after earlier trading as high as $141.59, within striking distance of its their 52-week high of $144.25.
The analyst boosted his target price for Terra Industries to $13.60 from $11.80, as he raised his 2007 earnings per share estimate to 38 cents from 12 cents. Wall Street had been looking for 55 cents.
Shares of the Sioux City, Iowa-based company picked up 24 cents, or 2.4 percent, to $10.15 on the NYSE. They set a new high of $10.17 earlier in the session, topping their prior high of $9.93 set earlier this month.
