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Agrium Inc. posted net profit (attributable to its equity holders) of $67 million or 49 cents per share in the fourth quarter of 2016, as against net earnings of $201 million or $1.45 million per share recorded a year ago. The lower net earnings were due to reduced year-over-year nutrient pricing.
Agrium’s adjusted earnings came in at 50 cents per share for the reported quarter, missing the Zacks Consensus Estimate of 65 cents.
Revenues decreased 5.3% year over year to $2,280 million in the reported quarter. The top line also missed the Zacks Consensus Estimate of $2,359 million.
Revenues from the Retail segment increased 3.6% year over year to $1.8 billion in the quarter, while gross profit rose 4% to $623 million. The growth in sales was driven by higer crop protection product andseed sales. Rise in profit was backed by strong demand for crop protection products and application services in the U.S and Australia.
Sales from the Wholesale segment declined 26% year over year to $657 million, primarily due to lower global fertilizer prices across all nutrients compared to the year-ago quarter. Gross profit was $134 million in the reported quarter, declining significantly from $320 million in the year-ago quarter.
Financial Position
Agrium ended the fourth quarter with cash and cash equivalents of $412 million, down roughly 20% year over year. Long-term debt dropped around 2.5% to $4,398 million as of Dec 31, 2016. Cash provided by operating activities increased around 33.8% year over year to $1,462 million in the quarter.
The company declared a quarterly dividend of 87.5 cents per share.
Agrium and Potash Corp. , in Sep 2016, agreed to combine their businesses in a “merger of equals” to create a fertilizer powerhouse with a pro-forma enterprise value of $36 billion. Pursuant to this agreement, the companies are restricted from purchasing their outstanding shares prior to completion of the proposed plan of arrangement.
Outlook
Agrium provided its earnings guidance for 2017 in the range of $4.50−$6.00 per share. The guidance assumes some recovery from the prevailing nitrogen prices during the major application seasons. Agrium expects Retail EBITDA to be in the range of $1.125 billion to $1.225 billion, and Retail nutrient sales volumes to range between 10.2 million to 10.6 million tons in 2017. The company anticipates nitrogen production to total 3.6 to 3.8 million tons. Agrium's expects potash production of between 2.4 and 2.8 million tons in 2017.
Total capital expenditures are expected to be in the range of $650 million to $750 million, of which around $500 million to $550 million is anticipated to be sustaining capital expenditures. Agrium's effective tax rate for 2017 is expected to range between 27% and 29%.
Price Performance
Agrium has underperformed the Zacks categorized Fertilizer industry over the past three months, partly due to the pricing headwinds faced by the company. During this period, the company’s share price gained 6.3%, while the industry saw a 12.7% increase.
BHP Billiton has long term expected growth rate of 5.6%.
Iamgold has long term expected growth rate of 3%.
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Agrium (AGU) Lags Earnings, Sales Estimates in Q4
Agrium Inc. posted net profit (attributable to its equity holders) of $67 million or 49 cents per share in the fourth quarter of 2016, as against net earnings of $201 million or $1.45 million per share recorded a year ago. The lower net earnings were due to reduced year-over-year nutrient pricing.
Agrium’s adjusted earnings came in at 50 cents per share for the reported quarter, missing the Zacks Consensus Estimate of 65 cents.
Revenues decreased 5.3% year over year to $2,280 million in the reported quarter. The top line also missed the Zacks Consensus Estimate of $2,359 million.
Agrium Inc. Price, Consensus and EPS Surprise
Agrium Inc. Price, Consensus and EPS Surprise | Agrium Inc. Quote
Segment Review
Revenues from the Retail segment increased 3.6% year over year to $1.8 billion in the quarter, while gross profit rose 4% to $623 million. The growth in sales was driven by higer crop protection product andseed sales. Rise in profit was backed by strong demand for crop protection products and application services in the U.S and Australia.
Sales from the Wholesale segment declined 26% year over year to $657 million, primarily due to lower global fertilizer prices across all nutrients compared to the year-ago quarter. Gross profit was $134 million in the reported quarter, declining significantly from $320 million in the year-ago quarter.
Financial Position
Agrium ended the fourth quarter with cash and cash equivalents of $412 million, down roughly 20% year over year. Long-term debt dropped around 2.5% to $4,398 million as of Dec 31, 2016. Cash provided by operating activities increased around 33.8% year over year to $1,462 million in the quarter.
The company declared a quarterly dividend of 87.5 cents per share.
Agrium and Potash Corp. , in Sep 2016, agreed to combine their businesses in a “merger of equals” to create a fertilizer powerhouse with a pro-forma enterprise value of $36 billion. Pursuant to this agreement, the companies are restricted from purchasing their outstanding shares prior to completion of the proposed plan of arrangement.
Outlook
Agrium provided its earnings guidance for 2017 in the range of $4.50−$6.00 per share. The guidance assumes some recovery from the prevailing nitrogen prices during the major application seasons. Agrium expects Retail EBITDA to be in the range of $1.125 billion to $1.225 billion, and Retail nutrient sales volumes to range between 10.2 million to 10.6 million tons in 2017. The company anticipates nitrogen production to total 3.6 to 3.8 million tons. Agrium's expects potash production of between 2.4 and 2.8 million tons in 2017.
Total capital expenditures are expected to be in the range of $650 million to $750 million, of which around $500 million to $550 million is anticipated to be sustaining capital expenditures. Agrium's effective tax rate for 2017 is expected to range between 27% and 29%.
Price Performance
Agrium has underperformed the Zacks categorized Fertilizer industry over the past three months, partly due to the pricing headwinds faced by the company. During this period, the company’s share price gained 6.3%, while the industry saw a 12.7% increase.
Zacks Rank & Key Picks
Agrium currently carries a Zacks Rank #3 (Hold).
Some better-ranked companies in the basic materials space include BHP Billiton Ltd. (BHP - Free Report) and Iamgold Corp. (IAG - Free Report) , both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
BHP Billiton has long term expected growth rate of 5.6%.
Iamgold has long term expected growth rate of 3%.
Zacks' Top 10 Stocks for 2017
In addition to the stocks discussed above, would you like to know about our 10 finest buy-and-hold tickers for the entirety of 2017?
Who wouldn't? As of early December, the 2016 Top 10 produced 5 double-digit winners including oil and natural gas giant Pioneer Natural Resources which racked up a stellar +50% gain. The new list is painstakingly hand-picked from 4,400 companies covered by the Zacks Rank. Be among the very first to see it>>