PotashCorp (POT) Tops Q2 EPS by 6c, Beats on Revenues; Maintains FY EPS Outlook

PotashCorp (NYSE: POT) reported Q2 EPS of $0.24, $0.06 better than the analyst estimate of $0.18. Revenue for the quarter came in at $1.12 billion versus the consensus estimate of $1.07 billion.

GUIDANCE:

PotashCorp sees FY2017 EPS of $0.45-$0.65, versus the consensus of $0.61.

Financial OutlookTaking the above market factors into consideration, we have raised the bottom end of our guidance range for potash sales volumes (9.0-9.4 million tonnes) and increased the range for potash gross margin ($650-$850 million). Our estimates include the benefit of the Rocanville capacity audit results, which increased our Canpotex sales entitlement to approximately 55 percent for the second half of 2017.

In nitrogen, we expect recent capacity additions to continue to pressure prices and alter trade flows, keeping margins below those of 2016. In phosphate, we anticipate that challenging market fundamentals will continue to impact prices and our profitability. Given these considerations, we have lowered the top end of our combined nitrogen and phosphate gross margin range and now estimate $150-$300 million in 2017.

With lower annual earnings forecast in the US, we now anticipate an income tax recovery and have adjusted our effective income tax rate to a negative range of 3-6 percent.

We now expect higher provincial mining and other taxes in the range of 19-22 percent of potash gross margin for 2017, primarily due to an increased profit tax forecast resulting from lower estimated capital depreciation.

Income from equity investments is now anticipated in the range of $170-$190 million, above the previous guidance range, largely due to the strength of SQM earnings.

Due to the recent strength of the Canadian dollar, we have revised our full-year foreign exchange rate assumption to CDN$1.32 per US dollar.

Based on these factors, we have maintained our full-year 2017 earnings guidance of $0.45-$0.65 per share, including merger-related costs now expected to be $0.06 per share.

For earnings history and earnings-related data on PotashCorp (POT) click here.

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