Why Potash (POT) Is Down Today

NEW YORK (TheStreet) -- Potash Corporation of Saskatchewan  (POT) was falling 3.39% to $30.75 on Thursday after the company reported a 45% decrease in profits in its fourth-quarter earnings report.

The world's biggest potash miner reported that its profits dropped to $230 million, or 26 cents a share compared to $421 million, or 48 cents a share, in the same period one year earlier. Excluding a charge of five cents per share from December job cuts, Potash earned 31 cents a share. This fell below analysts' expectations of 33 cents a share.

Total sales also declined to $1.54 billion from $1.64 billion, and gross margins also declined.

Potash also forecast lower-than-expected earnings guidance for the first quarter and fiscal year 2014. The company is projecting a first-quarter profit of 30 to 35 cents a share and profit for the full year of $1.40 to $1.80 a share. This falls under analysts' expectations of $2 a share and also marks a decline from the profit of $2.04 a share in 2013.

"This past quarter was a difficult one," said President and CEO Bill Doyle in the company's statement. "Pricing headwinds - most notably in potash - weighed on our performance, although there were signs as the quarter came to a close that the uncertainty in global markets was beginning to abate. Our focus remained on those things we can influence and we took important steps to enhance our competitive position across all three nutrients and prepare the company to deliver better performance."

TheStreet Ratings team rates POTASH CORP SASK INC as a "hold" with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate POTASH CORP SASK INC (POT) a HOLD. The primary factors that have impacted our rating are mixed ? some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its expanding profit margins and largely solid financial position with reasonable debt levels by most measures. However, as a counter to these strengths, we also find weaknesses including feeble growth in the company's earnings per share, deteriorating net income and weak operating cash flow."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • 40.99% is the gross profit margin for POTASH CORP SASK INC which we consider to be strong. Regardless of POT's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, POT's net profit margin of 23.42% significantly outperformed against the industry.
  • The current debt-to-equity ratio, 0.36, is low and is below the industry average, implying that there has been successful management of debt levels. Although the company had a strong debt-to-equity ratio, its quick ratio of 0.80 is somewhat weak and could be cause for future problems.
  • The revenue fell significantly faster than the industry average of 5.9%. Since the same quarter one year prior, revenues fell by 29.1%. Weakness in the company's revenue seems to have hurt the bottom line, decreasing earnings per share.
  • The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Chemicals industry. The net income has significantly decreased by 44.8% when compared to the same quarter one year ago, falling from $645.00 million to $356.00 million.
  • Net operating cash flow has decreased to $616.00 million or 18.84% when compared to the same quarter last year. In conjunction, when comparing current results to the industry average, POTASH CORP SASK INC has marginally lower results.
  • You can view the full analysis from the report here: POT Ratings Report

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