Positive Barron's Article Can't Boost Shares of Agrium (AGU)

Despite a positive article which was highlighted in this weekend's edition of Barron's, shares of Agrium (NYSE: AGU) are moving about 2% lower this morning. The stock most recently traded at $39.19.

The Barron's piece looks at Agrium from a valuation standpoint, calling the stock "dirt cheap". Based on expected 2010 earnings of $7.14, shares of Agrium trade at just 5.8x, sharply lower than most other fertilizer stocks. For example, Monsanto (NYSE: MON) currently trades at about 20x forward EPS.

Some analysts are questioning the depressed valuation, pointing out that fundamentals at Agrium have been improving following last year's crash in commodity and agriculture prices. Specifically, Barron's likes that Agrium has been expanding its retail network, which now makes up about 15% of all the U.S. farm-retail market. Expansion into this segment of its business has provided Agrium with greater earnings stability, among other benefits, as Barron's mentions.

Barron's also notes Agrium's recent revised proposal to purchase CF Industries (NYSE: CF) for $35 in cash plus one common share of Agrium for each CF share. Agrium's President and CEO, Mike Wilson, commenting on the possible deal, said with or without CF, Agrium has "lots of opportunity to grow", calling for a stronger second half to '09 given "pent-up" demand from farmers.

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