Earnings Preview : Potash Corp. (NYSE : POT) First Quarter 2010
Wednesday, April 21, 2010 2:22 PM

Potash Corp. (NYSE : POT) is scheduled to report its Q1 2010 results after the market closes on April 28. 2010. The management's EPS expectation for Q1 2010 has increased from $0.70-1.00 to $1.30-1.50. The bulk of the guidance increase is related to record domestic potash volume, with a smaller portion coming from better than expected nitrogen and phosphate pricing. After six consecutive quarters of depressed USvolume, the US farmer has come back to the potash market in force. In particular, Potash Corp. will record its highest ever US sales volume during 1Q10 (the previous record was 2Q04's 1.128 million tonnes), driven by very low pipeline inventories, a well below normal fall season due to poor weather, declining soil inventories, and strong commodity (corn, soy, etc.) price signals. The wholesalers/retailers are likely toleave the spring season with relatively low inventory levels.
Potash Corporation of Saskatchewan Inc. is the world''s largest potash company, the third largest phoshate producer and the second largest nitrogen producer in the world. Behind its growing success lies a vital infrastructure: knowledgeable PCS Sales staff throughout Canada and the United States, a transportation network that includes truck, train, barge, lake ship and ocean vessel, and warehouses strategically located in major consuming areas. 
As for Q4 2009, Potash Corp. reported earnings of $0.80 per share1 ($243.6 million), which compared to $2.56 per share ($788.0 million) in the same period last year. Full-year 2009 earnings of $3.25 per share ($987.8 million) were the third highest in company history, but below the record $11.01 per share ($3.5 billion) earned in 2008. EBITDA totaled $414.2 millionQ4 2009 and $1.5 billion for the year, while cash flow prior to working capital changes was $503.5 million for the quarter and $1.4 billion for the year. Offshore investments in Arab Potash Company Ltd. (APC) in Jordan, Sociedad Quimica y Minera de Chile S.A. (SQM) in Chile and Israel Chemicals Ltd. (ICL) in Israel contributed $53.4 million in other income during the Q4 of 2009.
Analysts' estimates for Q1 2010 range from a low of $0.81 to a high of $1.50, compared to a consensus estimate of $1.32, with number of estimates being 23and the co-efficient variance 13.81. A likely strong 1Q10 volume has favorable COGS/mix implications (i.e., economies of scale for fixed costs, more volume sold at the higher US spot price). POT's revised 1Q 2010 guidance reflects consolidated EBITDA of approximately $730Mn versus $292Mn in the year-ago quarter. Consolidated sales expected to touch$1.45Bn, with a gross profit of $680Mn. Potash gross profits of $480-485Mn expected in Q1 2010 versus $167Mn in the year-ago-period and global shipments could increase four-fold to 2.2Mn mt versus 0.5Mn mt in 1Q:09. Phosphate gross profits could touch approximately $65Mn versus $9Mn in the year-ago period and Nitrogen gross profits could likely hover in the range of $130-135Mn.
The stock closed $110.41, up +3.43% on April 20, 2010 and most analysts' recommend this stock as a relative Overweight with an average price target of $128. The company's strong fundamentals drive upside potential.


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AnalystFirm NameSymbolEPS Estimate
ja teremtipTTG Investments GE$0.28
markinsurace guru CINF$0.36