Agrium's stock has been getting beaten up recently in the commodities sell-off but its earnings have been shining. Agrium has surprised on estimates 3 out of the last 4 quarters by an average of 57.04% as fertilizer prices have soared.
Fertilizer prices continue to remain high making Agrium, with a forward P/E of only 5.82, an attractive value stock.
Company Description
Agrium Inc. (AGU) produces and sells agriculture products in North and South America.
Headquartered in Calgary, Alberta, the company is the largest direct-to-grower agricultural retailer in the United States. AGU also supplies materials to the industrial sector which produces goods such as mining explosives, household products, pulp and paper and fiberboard.
Agrium has three segments. The Wholesale segment produces and distributes fertilizers, including nitrogen, phosphate and potash, as well as micronutrients from 12 production facilities in North America and Argentina.
The company produces ten million tonnes of fertilizer products annually, including about 6.1 million tonnes of nitrogen, 2.1 million tonnes of potash and 1.3 million tonnes of phosphate.
Approximately 15% of Agrium's Wholesale sales are to the industrial market, which uses the same ingredients as farmers in many of its products.
The Retail segment sells seed, fertilizers and crop protection chemicals and services from 500 retail centers in the United States, Argentina and Chile.
The Advanced Technologies segment produces controlled-release nutrients, micronutrients and plant protection products to agriculture, professional turf and ornamental markets in North America.
Impact of Potash of Saskatchewan's Strike
500 miners are currently striking at 3 of Potash of Saskatchewan's (POT) mines in Canada. The strike began on Aug 7 and, from press reports, looks no closer to being settled as there are no contract talks planned. The 3 mines produce 30% of Potash's potash production.
Why should Agrium investors care about a competitor's strike? Because the tight market is about to get even tighter.
About 5% of Potash's customers are industrial, as compared with 15% of Agrium's. Already, Potash has put its industrial customers on allocation due to supply shortages. If the strike continues, farming customers may also soon see allocation.
Prices of phosphates and potash for industrial usage has soared.
