Potash Corp. (NYSE:POT) recorded net earnings of $201 million or 24 cents per share in second-quarter 2017, up 71.4% from $121 million or 14 cents per share it earned a year ago. 
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The company’s adjusted earnings came in at 16 cents per share which narrowly missed the Zacks Consensus Estimate of 17 cents.
Net sales (as adjusted) for the quarter increased 7.4% year over year to $1,004 million and surpassed the Zacks Consensus Estimate of $936 million.
Segment Review
Potash: Potash gross margin was $213 million in the reported quarter, up from $123 million in the year-ago period due to increased prices, higher offshore sales volumes and reduced per ton costs. Sales volumes for the segment were 2.4 million tons, up 14.3% year over year. Average realized potash price was $174 per ton, up from the year-ago quarter figure of $154. This improvement reflects continued recovery in global spot prices.
Nitrogen: Gross margin was $68 million in the reported quarter, down from $130 million in the year-ago quarter due to weaker prices and higher U.S. natural gas costs. Sales volumes for the quarter were 1.6 million tons, up 6% due to stronger fertilizer demand. Average realized price of $223 per ton during the quarter was down from the year-ago quarter figure of $244. The decline was due to increased global supply.
Phosphate: Sales volumes rose to 0.6 million tons from the year-ago figure of 0.5 million tons due to stronger North American agriculture demand. The company witnessed negative gross margin of $26 million for the quarter compared with a negative gross margin of $10 million in the year-ago quarter. Average realized phosphate price for the quarter was $407 per ton, down from $485 per ton recorded in the year-ago period owing to lower pricing of all products.
Potash Corporation of Saskatchewan Inc. Price, Consensus and EPS Surprise
Financials
Potash Corp.’s cash and cash equivalents were $97 million as of Jun 30, 2017 compared with $143 million as of Jun 30, 2016. As of Jun 30, 2017, long-term debt was $3,708 million down from the year-ago figure of $3,713 million.
Guidance
Potash Corp. expects full-year 2017 earnings in the range of 45–65 cents per share that includes merger related charges of 6 cents per share. The company has revised total potash sales volume guidance and it now expects sales in the range of 9-9.4 million tons (up from 8.9-9.4 million tons) in 2017. It projects potash gross margin of $650–$850 million for the year.
Capital expenditures for the year are projected at $600 million.
Potash Corp. expects combined gross margin for nitrogen and phosphate in the band of $150–$300 million for 2017.
The company expects effective income tax rate to be negative in the range of 3–6% and selling and administrative expenses in the range of $220 million–$230 million for 2017.
Price Performance
Potash Corp. outperformed the industry over the last three months. While the company’s shares rose 5.8% over this period, the industry recorded a gain of 2.8%.
Zacks Rank & Key Picks
Potash Corp. currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies in the basic materials space include Akzo Nobel N.V. (OTC:AKZOY) , Arkema S.A. (OTC:ARKAY) and Hitachi Chemical HCHMY. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Akzo Nobel has an expected long-term earnings growth of 11.1%.
Arkema has an expected long-term earnings growth of 12.4%.
Hitachi Chemical has an expected long-term earnings growth of 5%.
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Arkema SA (ARKAY): Free Stock Analysis Report
Akzo Nobel NV (AKZOY): Free Stock Analysis Report
Potash Corporation of Saskatchewan Inc. (POT): Free Stock Analysis Report
HITACHI CHEMICL (HCHMY): Free Stock Analysis Report
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