Fertilizer firm Potash Corp. of Saskatchewan (NYSE: POT) was hit with a price-target cut from analysts at UBS today. The brokerage firm slashed its target price from $150 to $130, but reiterated its Buy rating on the stock. It's been a schizophrenic day for the company, brokerage-wise; the late-breaking note from UBS effectively dashed the upward momentum POT gained this morning when Dundee upgraded the North American fertilizer sector to Overweight.
In fact, "schizophrenic" more or less sums up analyst activity on POT during the past several weeks. Following its third-quarter earnings report on October 23, Potash Corp. received no fewer than five price-target cuts, along with three reiterations of bullish Buy or better ratings, plus an upgrade. To make matters even more interesting, this is the second price-target cut UBS has issued on POT in the past week -- the first cut, on October 29, was from $165 to $150.
According to Thomson Financial, the deluge of downward revisions might not be over yet. POT's average 12-month price target is $115.98. This consensus estimate represents a rather healthy premium of 36% to the stock's closing price last Friday. Considering that POT shares have plummeted about 41% year-to-date, it seems safe to say that expectations might be too high for this Canadian import.
Agrium (NYSE: AGU), North America's third largest fertilizer producer, closed at $38.78 Thursday. AGU November option implied volatility of 113 is above its 26-week average of 70 according to Track Data, suggesting larger price movement.
Potash (NYSE: POT) closed at $84.71 Thursday. POT November option implied volatility of 102 is above its 26-week average of 69 according to Track Data, suggesting larger price movement.
Terra Industries (NYSE: TRA), a producer of nitrogen products, closed at $21.82 Thursday. TRA November option implied volatility of 110 is above its 26-week average of 80, suggesting larger price movement.
Mosaic (NYSE: MOS), a producer of crop nutrients, closed at $37.81 Thursday. MOS November option implied volatility of 109 is above its 26-week average of 76 according to Track Data, suggesting larger price movements.
Option Update is provided by Stock Specialist Paul Foster of theflyonthewall.com
"Investing in agriculture-related companies has been one of our main themes for the past year, and we still favor it," say resource experts Roger Conrad and Yiannis Mostrous.
The co-editors of Vital Resource Investor note, "We're adding a new stock to the portfolio that should benefit from the increasingly higher global demand for fertilizer: Potash Corp. (NYSE: POT).
"Potash is the world's largest and lowest-cost publicly traded potash producer, the fastest-growing segment in the fertilizer business. Its potash reserves are sufficient for more than 100 years of production.
"The company controls about 70% of the world's excess capacity. Potash Corp is also the world's third-largest phosphate producer and fourth-largest nitrogen producer. Current phosphate reserves should last more than 50 years.
Covering the stock market is almost getting as easy as it was in 1999, except that instead of predicting another up day it is the exact opposite. An end of day rally blocked most of the losses but it hardly felt that way when you sat here all day. Ultimately this too will pass, it always does. But the reasoning we are getting for this is really about the same reasoning we have used all year: recession, de-leveraging, the unknown, a poor consumer, weakening China, forced liquidations, higher taxes coming, poor earnings quality, no outlook for growth, and on and on. Since there is really nothing new to say, you just have to wonder if Warren Buffett took his own advice too much to heart as he unzipped the purse and let it all fly....
Here is the next round of miserable and unofficial closing bell levels: DJIA: 8,691.25 (+2.02%) NASDAQ: 1,603.91 (-0.73%) S&P: 908.11 (+1.26%)
Amazon.com, Inc. (NASDAQ: AMZN) was hammered after its earnings report, but amazingly enough the value buyers took it back up to flat throughout the day. The online retailer beat earnings expectations but it guided revenues down enough that it spooked those who were just looking for a conservative number and the actual earnings range offered was too wide for comfort. Shares were actually up $0.01 at $50.00 in the final few minutes of the day.
Amgen Inc. (NASDAQ: AMGN) was a big winner after the troubled biotech beat earnings and actually raised guidance above the high-end of estimates. All drug sales came in above plan for its anemia franchise as some sale defections were less than many feared. Shares were up 11.5% at $55.71 in today's final minutes.
U.S. stock futures were flat to lower Thursday morning following the senate approval of its version of the $700 billion bailout package. Meanwhile, the Federal Reserve said it was considering a rate cut. Following all the economic data released Wednesday indicating the U.S. is in a recession, this isn't surprising. The ECB is also meeting today to consider its move. Today, the Labor Department will report weekly initial jobless claims and the Commerce Department will release August factory orders. Regulators also extended the ban on short-selling shares of some 800 financial companies.
UBS (NYSE: UBS), which has been hard hit by the credit crisis, said Thursday it expects to return to profit in the third quarter after four quarters of losses. The bank has substantially reduced its exposure to U.S. commercial and residential mortgages. The bank wrote down more than $40 billion and raised close to $30 billion.
Mosaic (NYSE: MOS) shares are down about 20% in pre-market trading after it missed analyst estimates when it reported its fiscal first-quarter earnings.
Marriott International (NYSE: MAR) was expected to report earnings of 32 cents a share in the third quarter. The company reported 34 centsearnings per share excluding an 8 cents adjustment.
UBS believes US airlines estimates are too low and will move higher. The firm upgraded AirTran (NYSE: AAI), AMR Corp (NYSE: AMR), Continental (NYSE: CAL), Delta (NYSE: DAL) and Northwest (NYSE: NWA) to Buy from Neutral and JetBlue (NASDAQ: JBLU) to Neutral from Sell.
JMP Securities upgraded DealerTrack (NASDAQ: TRAK) to OUtperform from Market Perform as they believe 2H08 guidance represents a floor and that 2009 estimates are achievable, among other reasons.
Potash (NYSE: POT) and Mosaic (NYSE: MOS) were raised to Buy from Hold at Soleil.
Argus upgraded Seagate (NYSE: STX) to Buy from Hold on Friday.
Analyst downgrades:
Jefferies downgraded Citrix Systems (NASDAQ: CTXS) to Underperform from Hold as they do not see a catalyst for the company to grow into 2009 consensus estimates. The firm lowered their target price to $25 from $32.
Citigroup said following Lehman's (NYSE: LEH) bankruptcy, they expect a distressed-sale of American International's (NYSE: AIG) MBS portfolio, resulting in the worst quarter yet for the company. Shares were cut to Hold from Buy.
D.R. Horton (NYSE: DHI) was downgraded to Sell from Hold and Pulte Homes (NYSE: PHM) was downgraded to Hold from Sell at Citigroup.
Merrill downgraded Goldman Sachs (NYSE: GS) to Neutral from Buy and JP Morgan (NYSE: JPM) to Underperform from Neutral.
Here's the answer every hedge fund knows: It will not let you raise numbers in the out years.
Right now there is a tremendous struggle going on about near-term and far-term earnings growth and what we can expect to see. Everyone knows when Mosaic and Potash report next week that the numbers will be beaten and the estimates raised.
But so what? If you scrap the ethanol mandate or if people even think that it will be scrapped, you will see grains collapse just as quickly as oil collapsed when we found a level we didn't need it -- remember, we don't "need" ethanol, but it is mandated.
Once again it's ugly out there today. The Dow Jones Industrial Average dropped below 11,000 for the first time in two years, plunging over 2%. The rest of the U.S. stocks are not far behind with both the Nasdaq composite and the S&P 500 down over 2% as well. It's depressing. But you don't have to look far to see a nicer picture, you just have to look up: up north that is.
The Toronto Stock Exchange has fared much better in what has officially become a U.S. bear market. Over the past year, while the S&P 500 sank over 19%, the S&P/TSX Composite index dropped only 3.4%. Year-to-date, while the S&P 500 declined over 16%, the TSX was barely down 1%. And if you stay away from financials on the TSX, you'd fare even better.
How so, you ask, doesn't the Canadian economy closely follows the U.S.'s? It's mostly true as the U.S. is Canada's biggest trading partner and the Canadian economy is intertwined with that of the U.S. For example, some of the layoffs at GM and Ford plants have occurred in Ontario plants, and Canada's unemployment rate edged up to 6.2% in June due to a drop in full-time jobs.
The thing is, though, that the TSX is heavily weighted in mining and oil & gas companies, sectors that have fared better than techs and financials the past year or so. Getting exposure to the Canadian market is very easy since many stocks also trade on U.S. exchanges, the famous of all may be Research in Motion (NASDAQ: RIMM). But there are others, and some of them, the U.S. investor may want to consider.
Wednesday saw the stock market register another data point of ignominious distinction: the S & P 500 entered bear market territory -- a drop of more than 20% from its October 2007 peak.
One would like to make a case for a rebound for the S&P 500 and the DJIA, but current economic fundamentals (unfortunately) make a stronger case for the opposite: sky high gasoline and oil prices, declining disposable income in several income groups, rising inflation, the worst housing market in more than 15 years, the probability of additional, substantial mortgage-backed asset write-offs, more than 400,000 jobs lost in the first six months of 2008. The prognosis: tough times ahead for the Dow. Let's hope it holds psychological support at 11,000 or technical support at 10,750.
If the Dow doesn't hold the above support levels ... well, let's not go there. Instead, let's focus on the positive. Are there any decent plays in these difficult times for the market and economy?
There are, for investors who can tolerate moderate risk or high risk, and who are not interested in a short-term trade of six months or less. These are longer-term investments where the goal is a double-digit, average, annual, total return on equity over 3-5 years. Investors should also be capable of tolerating a 20-25% pull-back.
Goldman Sachs has put a $285 price target on Potash (NYSE:POT) because of the "benefits of strong fundamentals in the fertilizer market", according to the AP.
Merrill Lynch upgraded Wachovia (NYSE:WB) to "neutral" from "underperform", according toBriefing.com. The news service also reports that Citigroup has initated Qualcomm (NASDAQ:QCOM) with a "buy".
Intuit (NASDAQ:INTU) downgraded to Sell from Neutral at Goldman Sachs, according to24/7 Wall St., The financial site also reports that Nokia (NYSE: NOK) has a lowered price target but maintained Buy at Merrill Lynch
Thomas Weisel downgraded Yahoo! (NASDAQ:YHOO) to "underweight" from "market weight," according toBriefing.com. The news service also reports that UBS upped its price target on Potash (NYSE:POT) from $250 to $285.
When natural disasters happen, there are always some companies that can turn the circumstances in their favor. Recent downpours in the Midwest provided such an opportunity as they came not only with high damages for people in the area, but also with floods for crop production, causing even higher agricultural commodity prices. The rise in corn and soybeans prices could easily lead to an increased demand for seeds, agricultural equipment, and fertilizers. BusinessWeeksuggests some big names to invest in that could offer us the advantages we are looking for.
One such company is Archer Daniels Midland (NYSE: ADM), which could also benefit from higher ethanol prices, after purchasing seven businesses in 2007. Bunge Limited (NYSE: BG) is also amid possible winners, having forecast better-than-expected fertilizer earnings. Shell eggs producer Cal-Maine Foods (NASDAQ: CALM) is also on the selected list; the company saw its shares climb 15% year to date, and has just revealed a new dividend payout policy.
Another important name is Mosaic Co. (NYSE: MOS), whose stock prices have surged 70% so far this year. BusinessWeek cites Mosaic as being able to benefit from higher prices for fertilizer and potash. Following the same logic, the article points out potash provider Potash Corp. of Saskatchewan (NYSE: POT) and fertilizer distributor CF Industries Holdings (NYSE: CF), which should be able to take advantage of the weak dollar and higher sales prices.
And yet my best indicator, the Standard & Poor's oscillator, which you can order from their Web site, is saying you cannot be short here and should be doing some buying. The oscillator, when it has been at minus 5, has called a bottom almost every time in the last decade, plus or minus a day or two, and a percent or even two, and I have long since learned not to see through it.
Agrium
Covering the stock market is almost getting as easy as it was in 1999, except that instead of predicting another up day it is the exact opposite. An end of day rally blocked most of the losses but it hardly felt that way when you sat here all day. Ultimately this too will pass, it always does. But the reasoning we are getting for this is really about the same reasoning we have used all year: recession, de-leveraging, the unknown, a poor consumer, weakening China, forced liquidations, higher taxes coming, poor earnings quality, no outlook for growth, and on and on. Since there is really nothing new to say, you just have to wonder if Warren Buffett 
U.S. stock futures were flat to lower Thursday morning following the .gif){kind=logo}
Once again it's ugly out there today. The Dow Jones Industrial Average dropped below 11,000 for the first time in two years, plunging over 2%. The rest of the U.S. stocks are not far behind with both the Nasdaq composite and the S&P 500 down over 2% as well. It's depressing. But you don't have to look far to see a nicer picture, you just have to look up: up north that is.
The U.S. stock market's summer doldrums continue. 
When natural disasters happen, there are always some companies that can turn the circumstances in their favor. Recent downpours in the Midwest provided such an opportunity as they came not only with high damages for people in the area, but also with floods for crop production, causing even higher agricultural commodity prices. The rise in corn and soybeans prices could easily lead to an increased demand for seeds, agricultural equipment, and fertilizers. BusinessWeek 
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