Why 2016 Looks Bleak for Potash Corporation’s Sales

Adam Jones

Will Potash Corporation's 4Q15 Results Lighten Investors' Mood?

(Continued from Prior Part)

Potash Corporation’s 4Q15 sales

Potash Corporation’s (POT) forward sales expectations have weakened over the past month. In 4Q15 alone, analysts are expecting the company to report sales of $1.4 billion, down about 19.9% YoY (year-over-year). The picture does not get better for the next 12 months.

Next-12-month forecast

Over the next 12 months, Potash Corporation’s (POT) sales are expected to be about $5.4 billion, down from $6.3 billion in the last four quarters. Bear in mind that the above sales figures don’t include freight, transportation, and distribution costs, which are around 8% of total sales.

Potash Corporation is in the business of all three NPK fertilizers. It earns about 37% of its total sales from the potash segment, about 31% from the nitrogen segment, and the remaining 32% from the phosphate segment. Potash Corporation’s sales are impacted by shipment and fertilizer prices for all three fertilizers.

An alternative way to gain exposure to Potash Corporation without investing directly in the company’s stock is the Market Vectors Agribusiness ETF (MOO). MOO has approximately 5% of its total holdings in Potash Corporation (POT). Potash Corporation (POT), Mosaic (MOS), CF Industries Holdings (CF), and Agrium (AGU) form about 14% of the Market Vectors Agribusiness ETF (MOO).

The lower YoY sales over the next four quarters in the chart above implies that either lower shipments or lower fertilizer prices or both for any of Potash Corporation’s three NPK segments are expected. We will discuss price as well as shipment expectations in the next few parts of this series.

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