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Agrium's (AGU) Earnings and Revenues Beat Estimates in Q2

Agrium Inc. AGU posted net earnings (attributable to its equity holders) of $557 million or $4.03 per share in the second quarter of 2017, a roughly 1.2% decline from $564 million or $4.08 per share recorded a year ago. The bottom line was affected by weaker nitrogen and phosphate prices, partly offset by higher Retail earnings, strong potash results and reduced fixed costs in the Wholesale business.
 
Barring one-time items, Agrium’s adjusted earnings came in at $4.09 per share, beating the Zacks Estimate of $4.04 per share.
 
Revenues decreased 1.5% year over year to $6,319 million in the reported quarter. The top line also topped the Zacks Consensus Estimate of $6,185 million.
 
Agrium Inc. Price, Consensus and EPS Surprise
 

Agrium Inc. Price, Consensus and EPS Surprise | Agrium Inc. Quote

Segment Review

Revenues from the Retail segment decreased 1.5% year over year to $5.7 billion. Gross profit rose 1.6% year over year to $1.3 billion, driven by higher sales volumes and increased sales of proprietary products that have higher margins.

Sales from the Wholesale segment declined 3.9% year over year to $848 million. Gross profit was $196 million in the reported quarter, declining from $201 million in the year-ago quarter primarily due to lower nitrogen and phosphate products pricing and higher depreciation related to the recent expansion at the Borger nitrogen facility and increased depreciation at the Conda phosphate mine.

Financial Position

Agrium ended the second quarter with cash and cash equivalents of $319 million, up roughly 3.9% year over year. Total long-term debt dropped around 2.4% to $4,410 million as of Jun 30, 2017. Cash used in operating activities was $115 million in the quarter.

Outlook

Agrium provided its revised earnings guidance for 2017 in the range of $4.75−$5.25 per share (compared with $4.75 to $5.75 per share expected earlier). The company has lowered the top end of its guidance due to an expected weak nitrogen pricing environment and the challenging spring weather conditions which impacted North American Retail crop nutrient margins and sales volumes. Agrium expects Retail EBITDA to be in the range of $1.15–$1.2 billion, and Retail nutrient sales volumes to range 10–10.4 million tons in 2017. The company anticipates nitrogen production to total 3.5–3.6 million tons. Agrium's expects potash production of 2.5 – 2.7 million tons in 2017.

Total capital expenditures for 2017 are expected to be in the range of $650 – $700 million. Agrium's effective tax rate for 2017 is expected to range between 27% and 29%.

Price Performance

Agrium has underperformed the industry over a year. During the said period, the company’s shares have moved up 6.6%, while the industry witnessed an 8.8% gain. 

 
Zacks Rank & Key Picks
 
Agrium currently carries a Zacks Rank #4 (Sell).
 
Some better-ranked companies in the basic materials space include BASF SE BASFY, The Chemours Company CC and Kronos Worldwide KRO. All three stocks sport a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
 
BASF has an expected long-term earnings growth of 8.6%.
 
Chemours has an expected long-term earnings growth of 15.5%.
 
Kronos Worldwide has an expected long-term earnings growth of 5%.
 
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BASF SE (BASFY): Free Stock Analysis Report
 
Kronos Worldwide Inc (KRO): Free Stock Analysis Report
 
Chemours Company (The) (CC): Free Stock Analysis Report
 
Agrium Inc. (AGU): Free Stock Analysis Report
 
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