Agrium Shares Rise on Upgrade Associated Press 08.17.07, 11:36 AM ET
Shares of fertilizer producer and marketer Agrium Inc. rose Friday after a CIBC World Market analyst upgraded the shares, saying recent market declines shouldn't affect the agricultural sector.
The upgrade came as stocks soared due to a decision by the Federal Reserve to cut the discount rate on loans it makes to banks by half a percentage point.
Agrium (nyse: AGU - news - people ) shares rose $1.25, or 3.4 percent, to $37.92 in morning trading.
Analyst Jacob Bout upgraded the shares to "Sector Outperfomer" from "Sector Performer," noting that the average share price of all fertilizer companies have dropped by about 23 percent on average in the past month. Friday's rising stock price comes after Agrium shares dipped 20 percent in the past month.
Bout said the declining share prices are "overdone" given that the companies are more influenced by agricultural factors than economic ones.
"We believe the extent of sell-off in Agrium's stock with the general decline in the markets is overdone as the agricultural cycle trades off different fundamentals from the economic cycle," he said in a note to investors. "The agricultural cycle and economic cycle have a weak relationship as the agricultural cycle trades off different fundamentals including population growth, ethanol demand and changing diets due to growth in the middle class."
Bout added that Agrium's share price shows a strong relationship with Black Sea urea prices which have jumped about $30 per metric ton in a week.
"The recent strength in urea prices bodes well for Agrium as it is the largest North American nitrogen producer," he said.
