(Repeats Jan. 26 article without changes)
* Potash Corp to announce Q4 results Thursday
* Bulls see demand recovery pushing share price higher
* Bears see estimates revised lower, shares overvalued
By Euan Rocha
TORONTO, Jan 26 Shares of the world's largest
fertilizer maker, Potash Corp of Saskatchewan (POT.TO), have
risen almost 15 percent over the last three months as investors
eye a sharp recovery in demand this year.
The Saskatoon, Saskatchewan-based company is expected to
announce its fourth-quarter and full-year results on Thursday,
when it will also give its views on the demand outlook for
Most analysts and investors expect a sharp recovery in
fertilizer demand this year after a slump in 2009, when the
global economic slowdown and credit crunch hurt demand. Shares
of Potash Corp have already risen C$14.40 over the last three
months, in anticipation of this rebound.
But is there still room for Potash Corp shares to climb, or
is the stock likely to tumble?
ROOM TO GROW
BMO Capital markets analyst Edwin Chee sees Potash Corp
benefiting from a recovery in demand for potash -- a key crop
"We believe that the worst is coming to an end for the
potash industry and that investors should take advantage of the
current weakness in the stock price to accumulate the stock,"
said Chee in a note to clients.
Chee, who has an "outperform" rating on the company's
shares, said the recent declines in North American potash
inventories at the producer level are a positive sign.
"This is likely to result in greater price stability in
2010 with the prospect of stronger prices emerging in 2011,"
said Chee, who has a $135 price target on the company's
LIKELY TO WILT
Atlantic Equities analyst Colin Isaac argues that Potash
Corp's shares are overvalued, as analysts' earnings
expectations for 2011 are still too high.
Most analyst estimates for 2011 earnings "reflect a full
normalization in volumes, plus a recovery in potash prices from
current levels," Isaac said.
He said the company's shares historically traded at 15
times expected earnings, while they are currently trading at
roughly 19 times analysts' 2010 consensus view and 15 times the
2011 consensus view.
The shares may appear fairly valued based on the current
2011 consensus view, said Isaac, but he believes that most
analysts' 2011 earnings expectations will have to be revised
lower, making shares expensive at the current price level.
Isaac, who has a $90 price target and an "underweight"
rating on the company's stock, doubts that potash prices can
recover while more production capacity continues to come on
(Reporting by Euan Rocha; editing by Peter Galloway)