Getting Aggressive for Agrium

Reiterating his bullish case for Agrium Inc. (AGU), Zacks senior agricultural sector analyst Paul Raman, CFA explains why he rates the stocks as Buy and the future looks bright for the fertilizer company:

'Agrium is growing through acquisition and incremental expansion of existing operations. Supply/demand is strong for nitrogen and phosphate fertilizers, and the company has high leverage to increasing product prices. The company also has significant free cash flow. Agrium is growing through acquisition and incremental expansion of existing operations.

'Agrium Inc. announced that net earnings for the third quarter of 2007 were $51million ($0.38 diluted earnings per share) versus net earnings of $1million ($0.01 diluted earnings per share) for the same period in 2006. Retail's third quarter net sales were $427-million compared to $342 million in the third quarter of 2006.

'Wholesale third quarter net sales were $563-million compared to $493-million in the third quarter of 2006. Wholesale's overall natural gas cost in the third quarter of 2007 was $5.57/MMBtu compared to $4.61/MMBtu for the same quarter of 2006, due to higher U.S.-hedged gas costs combined with higher international gas costs. Agrium is trading at 16.6x our 2008 estimate of $4.15. As a result, we rate the shares a Buy with a target of $80. This is 19.3x our 2008 estimate.'

Nova Chemicals Stays a Buy

A Buy recommendation, with a slight change in the price target, has been maintained for chemical company Nova Chemicals (NCX) by Zacks senior chemical industry analyst Paul Raman, CFA.  Here's what his latest update had to say:

'Nova has the Alberta advantage, which is partly due to the scale of the ethylene crackers, which are more than 2.5x the scale of the average North American crackers. Second, in western Canada, Nova has access to lower-cost gas, compared with the U.S. Gulf Coast.

'These account for Nova's historical average of $0.07/lb advantage in ethylene production costs compared to the US Gulf Coast ethane-based ethylene producers. Near-term conditions are firm, with global ethylene demand growth of 4% to outpace capacity growth of 3% in 2008. Each $0.01/lb increase in ethylene cash margin is $0.40 per share.

'Nova's earnings in the near-term will be driven by a relatively strong ethylene market and cost cutting in the styrenics business. There is significant cost-cutting in the styrenics business. Near-term ethylene conditions are firm, and the company has a competitive advantage. We rate the stock a Buy with a target of $35.' 

Target $140 on HDFC Bank

The following excerpts explain why Zacks senior banking sector analyst Ann H.