fertilizer to see continued upward momentum

Fertilizer stocks to see continued upward momentum - Merrill Lynch
Thursday, April 03, 2008; Posted: 01:03 PM


Fertilizer stocks will see continued upward momentum amid surging phosphate and potash prices, Merrill Lynch said Thursday.

In a note to clients, analyst Don Carson raised estimates and price objectives for Potash Corp. of Saskatchewan, Mosaic Co., Agrium Inc. and CF Industries Holdings Inc. He placed a buy rating on all four stocks, as well as Terra Industries Inc., a nitrogen fertilizer producer.

Carson said the recent pullback in the fertilizer sector is a buying opportunity and that the peak for earnings per share for fertilizer producers is likely still a couple of years away.

He noted that with the exception of Terra Industries, his 2008 and 2009 earnings-per-share estimates were roughly 50% above consensus because of accelerated price momentum for phosphate and potash.

The greatest risk to the stocks would be a pullback in grain prices, he said. Potash has the best long-term fundamental outlook of the three primary fertilizer nutrients, with strong demand growth likely to continue.

The Market Vectors Agribusiness ETF (MOO) was up 3.7% at $56.01 on volume about 50% higher than the 30-day daily average.

Among the ETF's more heavily weighted components, Mosaic shares jumped 8.1% to $108.26, and Potash Corp. shares rose about 4.3% to $168.10, down from an earlier intraday record high of $169.33.

Agrium shares climbed 6.2% to $66.63, CF Industries shares rose 8.6% to $115.02, and the stock of Terra Industries rose 3.3% to $37.37.

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