Agrium, Inc. (AGU) is growing through acquisition and incremental expansion of existing operations. The proposed UAP acquisition is likely to drive revenues and profits for Agrium on the back of an expanded product line in the major business segment.
On February 13, 2008, Agrium announced fourth quarter and full-year 2007 results. In the fourth quarter, the company reported diluted earnings per share of $1.24 as compared to a loss of $0.47 in the same quarter of the previous year.
Net sales increased 58% to $1,492 million in the fourth quarter 2007. Agrium's gross profit in the fourth quarter more than doubled to $533 million from $231 million a year earlier. Gross profit from the company's wholesale fertilizer business soared to $343 million from $97 million. For the full-year 2007, diluted earnings per share were $3.25, compared to $0.25 per share in 2006. Net sales increased 25.6% to $5,491 million year over year.
Agrium is trading at 16.1x our 2008 estimate of $4.11. 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. As a result, we rate the shares a Buy with a target of $80. This is 19.5x our 2008 estimate.
Read the full analyst report on AGU.
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