Agriculture (Photo credit: thegreenpages)
AGU : NYSE : US$94.99
AGU : TSX
Agrium Inc. is a leading global producer and marketer of agricultural nutrients, industrial products, specialty fertilizers, and a major retail supplier of agricultural products and services in North America, South America and Australia.
All amounts in US$ unless otherwise noted.
Although the mid-point of Agrium’s guidance was below expectations, we don’t believe the market agreed with consensus given the spring planting delays to date and as a result, we see the guidance as a only a slight negative. The slow progress of the US spring planting has impacted the company’s outlook for the second quarter but not by as much as it could have been, as the weather has turned for the better.
Given Agrium’s earnings growth potential over the next few years, its relatively less volatile earnings profile and its exposure to a wide array of agricultural product offerings, we believe the overall demand across the agriculture input market will allow the stock to be a relative outperformer in the sector. Monsanto remains our top pick due to its earnings growth, market share increases and new product offerings. We continue to rank Agrium as our second preferred equity to own. We would then follow that with Mosaic and Potash Corp (in that order). We remain with our neutral view on the potash producers, as we believe the potash market lacks sufficient catalysts regarding an upside surprise in industry volumes or pricing in 2013. However, we believe Mosaic offers opportunities for a significant amount of cash to be returned to shareholders in the near term.
Agrium reported adjusted Q1/13 EPS of US$1.03 versus our and consensus estimate of US$1.08. Total gross margin was weaker than expected at US$716 million versus our expectation of US$791 million. Softer nitrogen gross profit (US$173 million versus our US$197 million) and a weaker retail segment (US$376 million versus US$413 million) were responsible for the discrepancy. Management guided Q2 EPS to a range of US$4.60-5.40. The company also announced an NCIB bid.
We continue to rate the shares of Agrium a BUY but have lowered our target price to US$118 from US$120, based upon a 12x multiple to our blended 2013E/2014E EPS.
Posted by jackbassteam on May 13, 2013
MONSANTO CHEMICAL COMPANY SMOKESTACKS SEEN FROM THE KANAWHA RIVER AT NITRO – NARA – 551009 (Photo credit: Wikipedia)
MON : NYSE : US$104.51
Monsanto is a leading global provider of seeds, biotechnology traits, and glyphosates. The company operates two segments: Seeds and Genomics and Agricultural Productivity. The seeds and genomics segment consists primarily of soybeans, corn, cotton, and vegetable seed brands, as well as biotechnology traits that help control weeds and insects. The agricultural productivity segment consists of crop protection, including glyphosates
Q2/F13 EPS BETTER THAN EXPECTED; F2013 GUIDANCE INCREASED
Monsanto remains our top large cap equity to own: From an industry viewpoint, we continue to expect a large planting in both the US this spring and in Latin America next fall, which should set up the company for a strong F2013 and a positive start to F2014. We further believe that the concern farmers have had over sourcing the best seed this year as a result of last year’s drought-plagued crop should allow for an increase in margins. We believe Monsanto will be able to capitalize on these macro events more than its peers due to its yield leading products, both current and those in the pipeline, and the benefit that we should continue to see roll out in both North and South America through our forecast period. We expect the company to improve upon its market share, and going forward, we see no equal when it relates to the level of product launches the company should be able to introduce both in the near and medium term. We also believe the company has done a good job of diffusing a potential negative RR1 soybean event in Brazil next year through its disclosure, the removal of the related forecast earnings guidance from the current fiscal year (and next), and the proactive signing of farmers to the next generation product. As a result, we believe the company’s shares will continue to outperform its peers and the market in 2013.
Monsanto reported adjusted Q2/F13 EPS of US$2.73 versus our estimate of US$2.38 and consensus of US$2.57. Gross margin was reported at US$3.07 billion, above our US$2.88 billion estimate (Figure 1). Operating costs were US$958 million versus our expectation at US$988 million. The company increased its ongoing F2013 EPS guidance to US$4.40-4.50 versus US$4.30-4.40 previously, our estimate of US$4.45, and consensus of US$4.57
We continue to rate the shares of Monsanto a BUY, but have increased our 12-month target price to US$121.00 from US$113.00 previously, based upon a 23.5x multiple to our blended F2014E EPS of US$5.16.
Posted by jackbassteam on April 5, 2013
iron (Photo credit: Wikipedia)
NYSE : US$18.46
Shares of Cliffs Natural Resources dropped on Wednesday after Morgan Stanley downgraded the stock and Credit Suisse slashed its price target on the shares.
A big increase in the supply of iron ore pellets in the Great Lakes region over the next three years could hit earnings from Cliffs’ U.S. iron ore segment hard, Morgan Stanley said in a note to clients. Credit Suisse also sees a looming pellet surplus in the Great Lakes and said Cliffs may need to consider “drastic solutions” to shore up its balance sheet in the next 12 months, from selling iron ore assets in the Asia-Pacific region to a multibillion-dollar equity offering. “
Major reform is required if this business is to survive the next commodities cycle, in our view,” read the brokerage’s note. U.S. iron ore was responsible for about 60 percent of Cliffs’ earnings before interest, taxes, depreciation and amortization (EBITDA) in 2012, Kurtz said, and the segment’s EBITDA could drop by half.
Even before Wednesday’s decline, Cliffs’ stock had fallen 70% over the past 12 months. In February the company reported a quarterly loss, hurt by a $1 billion writedown and iron ore prices that swooned in the autumn on weak demand from China, the world’s largest producer and consumer of steel.
Posted by jackbassteam on April 1, 2013
KRFT : NYSE : US$51.37
We are increasing our target price (to $56 from $50) to reflect our increased confidence in the cost savings opportunity.
We see several years of improvements ahead following good initial progress on costs in Q4, the first quarter reported as a standalone company.
Besides the expansion of Lean Six Sigma and de-layering the organisation (the two major sources of efficiency that we detailed in our November 2012 initiation report), the rollout of Integrated Business Planning, supply chain rationalisation, SKU rationalisation and distribution efficiencies should between them provide ample scope for margin improvement over the medium term.
However, near term, we think the top-line is likely to be weak given pressure on the U.S. consumer, commodity deflation and difficult comps.
We raise our forecasts (by about 5% in 2014 & beyond), and our target price by 12% to reflect this increased confidence in the cost savings. We now expect an 8% CAGR in EBIT over the medium term vs. around 5% previously; the Q1 expectations are detailed on pg. 5 (CG est. EPS $0.66). The shares have risen 14% since November and we see 9% further upside from the current level. BUY.
Our new $56 target implies a 2014E PE of 17x and a 3.8% dividend yield. These ratings would put KRFT in-line with global Food companies but ahead of U.S. Food companies; however, the internal improvement at KRFT is a unique attraction, along with the high yield.
Share performance catalyst
Upgrades to consensus forecasts should drive the shares higher. The next opportunity for upgrades should be the Q1 results in early May.
Posted by jackbassteam on March 28, 2013
English: Tembec mill in Kapuskasing, Ontario, Canada (Photo credit: Wikipedia)
TMB : TSX : C$3.35
Tembec Inc. produces forest products, pulp, paper, paperboard, and chemicals. The company’s Forest Products division produces softwood lumber, hardwood lumber, hardwood flooring, etc. The Pulp division manufactures various types of pulps, while the Paper division produces newsprint and paperboard including coated covers, bleached paperboard for packaging, and bleached linerboard.
Tembec announced the sale of its Skookumchuck NBSK mill for $89 million, including working capital, to Paper Excellence. The transaction
is expected to close in Q2/13 and is subject to certain conditions and approvals. The Skookumchuck mill has capacity of 255,000 tonnes of
NBSK with its pulp shipped to North American and Asian customers.
The transaction implies a price per tonne of $350/t. Tembec management disclosed on its Q1/F13 conference call in late January that it had intended to sell the NBSK mill within the next 12 months. The Skookumchuck mill is the only NBSK mill that Tembec was operating, therefore, not a core asset within its portfolio. We expect that most of the proceeds from this transaction will go toward the boiler/turbine upgrade project at Tembec’s Temiscaming facility.
As of the last conference call, Tembec indicated that the project’s schedule has been pushed back, and that it is currently re-evaluating the project’s timeline and capex requirements. Overall, we had expected this announcement in the first half of 2013 to improve the liquidity toward the funding of its green energy initiative. We view the announced transaction as moderately positive as it should improve the company’s liquidity
position and enable it to move forward on the green energy project. We are reiterating our BUY rating and raising our target price to C$4.00
We have revised our estimates assuming that the transaction closes in late Q3/F13 with proceeds of $89 million. We will revisit our estimates as necessary following the update on the Temiscaming project timing expected with the Q2/F13 results in late April.
Our 12-month target price of C$4.00 represents an EV/EBITDA multiple of 5.4x our F2014 EBITDA estimate.
Posted by jackbassteam on March 28, 2013
Camping – Trench Cooking fire (Photo credit: Wikipedia)
BDE : NASDAQ : US$8.81
Black Diamond Inc. is a leading provider of outdoor recreation equipment and lifestyle products. BDE also develops, manufactures and distributes a broad range of products used for climbing, mountaineering, backpacking, skiing, and various other outdoor recreation activities under the Black Diamond and Gregory brands.
While Q4 results were just reported last week, we came away from the post-earnings meetings with emboldened confidence that the foundation has been laid, and the brand integrations are tracking to plan with the ultimate goal of creating a significantly larger company in one, three and five years. With a multitude of initiatives to keep the team busy, 2013 is understandably an important integration year. Now that the necessary expenses to support the integration are known and embedded in Street estimates, we believe the stock will begin reflecting the true intrinsic value BDE is creating. We reiterate our BUY and $13.50 target.
Apparel launched in fall 2013 should ramp quickly in future seasons as door penetration is to increase by 50% with the spring 2014 line and another 50% for the fall 2014 line.
Not only is POC already leveraging BDE’s existing distribution channels, it is also getting into the road-bike category (a natural extension). Ultimately, we believe POC could double its door count to ~6,000 as the road and commuter lines complement the ski/snowboard category.
Our $13.50 price target is derived by a discounted cash flow analysis
Posted by jackbassteam on March 19, 2013
Kaiser & sons (LOC) (Photo credit: The Library of Congress)
John Kaiser is the high-profile editor of the Bottom- Fishing Report and he created a lot of interest as he pointed out that 500 companies in the junior mining field have less than $200,000 in the bank. And in this ugly market, are in danger of disappearing.
Interesting because finding cheap mining stocks was his specialty.
Fresh from the massive PDAC Conference, we ask him to turn on his crystal ball for the future and tell us what he sees of interest. We have a long and rambling conversation so we hope we have got this all right!
1. Kaiser points out that there was 527 booths at the massive PDAC Conference, the biggest mining show in the world this past week. There were over 30,000 people that showed up, but he said the mood was a bit of a touch of reality. Kaiser points out that 114 of those booths were on his list of the companies that have less than $200,000 in the bank and how will they be able to fund themselves in these tough markets and to survive
is very much in doubt.
This correction Kaiser suggests, will separate the weak from the strong and there won’t be many companies around shortly.
2. Most companies in the mining sector Kaiser suggests, are in metals with supplies roughly in demand with demand. It would take an event such as a sudden increase or decrease in world economies, to alter current metal prices. Mines are starting up all over the world he suggests, helped by the past decade of good commodity prices and will meet any increase in demand. He uses the example of nickel, and notes that new mines coming on stream in places like the Philippeans and Indonesia, will meet that demand. These are not necessarily countries known for being big players in the mining sector.
3. The big problem with so many miners and developers Kaiser suggests is that mining costs and building new mines is simply out of control. He suggests that is one of the big problems of the day and that yes, they are aware of it and one has to be, as an investor, aware of operating costs.
Posted by jackbassteam on March 13, 2013
Iron ore, Newcastle (Photo credit: State Records NSW)
LIM : TSX : C$0.76
Labrador Iron Mines Holdings Ltd is re-activating the Schefferville iron ore project in north-western Labrador, Canada. The project contains 45 million tonnes of NI 43- 101 compliant plus 121 million tonnes of historic DSO iron ore resources. Processing requirements are minimal,
and transportation infrastructure is largely in place. First production occurred during June 2011 and the first shipment departed for China in early October 2011
We have updated our LIM valuation following the removal of our research restriction. We have incorporated the C$29 million marketed equity financing at an issue price of C$1.05 per unit, the C$3 million non-brokered private placement to Anglesey at C$1.065 per unit and Q3/F13 (October to December) operating and financial disclosures.
LIM is targeting CY13 production in the range of 1.7 to 2.0 million wet tonnes at a cash cost of C$65 to C$70 per tonne. Given the financings,
LIM noted in its Q3/F12 MD&A that it could now resume operations without additional working capital financing. Under this scenario, the
company could utilize trade credit, or negotiate an advance payment arrangement with a commodities dealer or a bank. At this stage, our
model assumes a C$30 million line of credit during the April to June 2013 quarter in order to fund remaining working capital needs, and to
meet capital expenditures during the 2013 operating season and thus minimize value-in-use discounts from low-grade sales.
We further assume a discretionary 21 million share equity issue at a price of C$1.50 during Q1/CY14 to help fund the Houston expansion.
Action and valuation
We are maintaining our SPECULATIVE BUY rating, but decreasing our 12-month target price to C$2.50 (from C$3.00) based on the average of:
i) our NPV12 estimate of C$2.44, (down from previous C$3.00); and
ii) 5x our FY16E EBITDA (essentially CY15E; prior to expansion to full 5mtpa, but with assumed access to a multi-user port) discounted back to 12 months from today, which would imply a share price of C$2.49.
Posted by jackbassteam on February 20, 2013
English: This is a logo for Teck Cominco. (Photo credit: Wikipedia)
(TCK.B : TSX : $33.28), Net Change: -1.17, % Change: -3.40%, Volume: 3,996,733
Teck Resources continued to slide on Friday. On Thursday, the diversified metals producer announced Q4/12 results that saw the company report $0.61 per share, well ahead of consensus estimates of $0.48.
The earnings beat versus estimates was due to lower coal cash costs of $103 per tonne, higher copper sales volumes of 105,000 tonnes and lower depreciation, partially offset by higher copper cash costs of US$1.79 per pound.
TCK.B also provided initial 2013 guidance which overall was soft. For 2013 copper production guidance ranged 330,000-370,000 tonnes, while coal production guidance ranged 24-25 million tonnes. Both of these were below Wowkodaw’s estimates of 374,000 tonnes and 25.5 million tonnes respectively. 2013 coal cash cost guidance of US$107- 117/tonne was in line with estimates of US$113/tonne. 2013 capital cost guidance was higher at $2.0 billion, due to spending on the QBII project being brought forward. For Q1/13, TCK.B has already reached agreements to sell 6.0 million tonnes of coal at an average price of US$159/tonne.
In project development, the company continues to make good progress on the mill modernization at its Highland Valley Copper mine, the acid plant project at Trail and the advancement of TCK.B’s new mine development projects. On TCK.B’s quarterly conference call, CEO Don Lindsay discussed acquisition opportunities (from Seeking Alpha transcript), “We talked about, in the past, that iron ore would be a good fit for our portfolio and it really would for all sorts of good reasons. I said in the last quarterly call that we’ve moved on because we just found the values too high. But values have come down and also, as probably those who follow the industry closely, there’s a few new assets that have become available.”
Posted by jackbassteam on February 11, 2013
(POT : TSX : $42.49)
Canaccord Strategist Martin Roberge believes the global economy has reached the “reacceleration” phase sooner than he expected.
Country leading economic indicators (LEIs) released this month suggest that the global economy is shifting from “stabilization” (i.e., Phase I) to
“reacceleration” (i.e., Phase II). An official confirmation will likely come around mid-February when OECD LEIs come out.
Roberge believe investors should gradually position portfolios toward Phase II of the business cycle which is characterized by rising equity and commodity prices and the beginning of a cyclical bear market in bonds. Of interest, Roberge points out that not only is the Fertilizer group a top performer in Phase II of the business cycle but the potash segment, though still quiet, could be bottoming out in H1/13.
Vale recently announced the indefinite suspension of work at its $6 billion Rio Colorado potash project in Argentina. This removes uncertainty with regards to the long-term global supply-demand outlook for potash. Also, after depreciating by more than 30% from their peak in 2011, the Indian rupee and Brazilian real have been strong lately.
Stronger currencies in these key potash markets increase odds of a rebound in fertilizer imports in 2013 given the strong historical relationship. Should the rupee and real continue to appreciate and stimulate potash imports, Roberge believes potash producers could reclaim some of the pricing power lost over the past year.
Potash Corp. a large beneficiary of higher potash prices raised its annual dividend 33% earlier this week to $1.12. It now trades at a 2.6% yield.
Posted by jackbassteam on February 4, 2013