Merrill Lynch raises view on fertilizer industry; upgrades Terra to buy Monday, December 17, 2007; Posted: 01:16 PM
NEW YORK, Dec 18, 2007 (Thomson Financial via COMTEX) -- TRA | charts | news | PowerRating -- Merrill Lynch Monday raised its outlook on the fertilizer industry, upping the price target and earnings outlooks on Mosaic Co., Potash Corp. and CF Industrial Holdings, citing recent increases in the price of fertilizer.
The firm also upgraded Terra Industries to buy from neutral. In a note to clients, Merrill Lynch wrote that the upgrade was "driven by renewed price acceleration for all fertilizer nutrients."
Fertilizer prices have increased by 10% to 20% over the past month, Merrill wrote, "driven by renewed strength in 2008 harvest month futures prices for corn, wheat, and soy."
The firm issued a $50 price target on Terra while raising its 2008 earnings outlook to $5 a share from $4 a share. The current mean estimate of analysts polled by Thomson Financial is $3.18 a share.
For the other companies, Merrill raised Mosaic's target to $106 from $85, and increased its 2008 earnings to $3.50 a share from $3.30 a share, versus the current analyst estimate of $3.37 a share.
Potash's target was raised to $160 from $145, while its earnings outlook was raised to $7.85 a share from $6.25 a share. The current Wall Street view is $4.98 a share.
Merrill noted that Potash raised its domestic prices by 50% to $300 in its fourth quarter, and said it expects a $30 to $40 increase in the first quarter, "as spot prices in the corn belt have surged well past list prices."
For CF, the company's target was raised to $130 from $115, and its earnings outlook was increased to $12 a share from $10.25 a share. Analysts are looking for $7.38 a share for 2008.
Shares of Terra rose 4%; Mosaic gained 1.7%; Potash climbed 1.3%; and CF increased 2.9% on Monday. Ryan Vlastelica rv/pc
