(By Balachander) CIBC World Markets Inc. downgraded its rating on shares of Potash Corp. of Saskatchewan Inc. (NYSE:POT) to "Sector Performer" from "Sector Outperformer", saying it expects longer potash surplus market.
The brokerage, which reduced price target on the stock to US$54 from US$60, also lowered 2012 EPS estimate for the company to US$3.33 from US$3.46 and 2013 EPS estimate to US$3.57 from US$4.03 on assumption of slower potash price growth due to slower demand.
Saskatoon, Canada-based Potash Corp. is engaged in the production and sale of fertilizers and related industrial and feed products primarily in the United States and Canada. In addition, the company provides solid and liquid phosphate fertilizers and animal feed supplements, among other products.
"As global demand is expected to remain flat year-over-year (India continues to sit on the sidelines and distributors are unwilling to restock), we expect potash pricing to follow suit," CIBC analyst Jacob Bout wrote in a note. The analyst said Brazilian demand remains the bright spot with shipments increasing in May & June, while the July line-up remains robust.
Bout expects the H2/12 Chinese contract price to be rolled over at $470/t for standard MOP. In contrast, Indian potash contract prices are expected to decline from $490/t last year (i.e. in line with Chinese pricing), while North American prices remain unstable, the analyst said.
The stock, which has been trading between $36.73 and $62.60 over the past year, shed 0.68 percent to trade at $45.53 on the NYSE.