Agrium, Inc. (AGU) has been jumping higher since early July as key agricultural crops across the world see big price gains on strong demand and erratic weather. With a bullish next-year estimate and solid valuation, this Zacks #1 rank stock has plenty of upward momentum.
Company Description
Agrium, Inc. together with its subsidiaries, produces and sells agricultural nutrients worldwide. The company was founded in 1931 and has a market cap of $11.9 billion.
As a service and product provider to agricultural producers, Agrium’s business does well when farmers are flush with cash on higher grain and crop prices. Although that trend has recently accelerated, it was on display in late July when Agrium reported solid Q2 results that handily beat expectations.
Second-Quarter Results
Although sales were up a marginal 3% from last year to $4.4 billion, profit was the second highest in company history, with earnings coming in at $3.16, 14% ahead of the Zacks Consensus Estimate.
The solid results were driven by erratic weather patterns in Western Europe and Russia, where a heat wave hurt wheat production, and an unusually wet summer domestically that crimped production as well. That soft production led to higher prices, which farmers used to buy fertilizers and nutrients for future crops.
Strong Balance Sheet
Agrium used the good quarter to strengthen its balance sheet, with its cash and equivalents jumping $580 million to $805 million while it total debt fell $175 million to $1.81 billion.
Estimates
We have seen some movement in estimates on the good quarter and climbing grain prices, with the current year up 20 cents in the last 2 months to $4.91. The next-year estimate is up 44 cents in the same time to $6.05, a bullish 23% growth projection.
Valuation
But in spite of the recent gains, the valuation picture still looks solid, with a forward P/E of 15.5 against its peers 17X.
2-Year Chart
On the chart, AGU has been hot since early July, jumping from $48 to a recent high above $78. The stochastic below the chart is signaling that shares are trading safely away from over-bought territory. Look for support from the long and short-term trend on any weakness, take a look below.
Michael Vodicka is the Momentum Stock Strategist for Zacks.com. He is also the Editor in charge of the new Zacks Momentum Trader Service.
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