POT - Potash Corp - Income was up 181% - pressure to produce food products continued to drive demand

Potash Corp. (POT) shares have been surging for the last 3 weeks ahead of the company's first quarter results, reported yesterday. The worlds largest producer of Potash did not disappoint. Income was up an amazing 181% from last year to $566 million. The company made special mention in its report about how it continues to benefit from the global forces of supply and demand within the agriculture and food markets. Potash also boosted its guidance for 2008, another very bullish signal from a company that is operating in the right industry at the right time.

Potash Corp. is an integrated producer of fertilizer, industrial and animal feed products. Potash is the worlds largest fertilizer company, specializing in the production of potash, nitrogen and phosphate. Potash carries a market cap. of $66 billion, was founded in 1953 and is based in Saskatoon, Canada.

Impressive First-Quarter Results

Potash reported very strong first-quarter results yesterday that handily beat expectations from the analyst community. Revenue increased 39% to $1.89 billion. Income was up 181% to $566 million from $198 million in the same period last year. This produced earnings of $1.74, well ahead of analyst expectations of $1.49 per share, and last quarter's record results of $1.16 per share.

Potash said that growing global pressure to produce food products continued to drive demand and push prices for potash, phosphate and nitrogen to record levels.

Industry Trend-Global Opportunity

As previously mentioned, Potash provided commentary about the global food dynamics that have been driving its profit. The company said that, "Continued rising world grain demand reduced the expected global stocks-to-use ratio for wheat and coarse grains to a record low in the first quarter of 2008. Some Asian and Latin American countries have now changed their export policies to ensure crops will be available for their own domestic use. This has put further pressure on distribution of the world's grain supply. This tight supply has resulted in higher prices for grain and other crops which, in turn, have raised global demand for fertilizers."

Potash also announced that it was going to bear the favor of higher prices, as many of its large-scale contracts are scheduled to reset. In North America, effective June 1, Potash is raising its price for delivered potash between $150 and $175 per short ton. With unprecedented demand for its products all across the world, and very strong pricing power, Potash is looking incredibly well positioned to continue its trend in earnings and share price appreciation.

Guidance and The Chart

After the fabulous first-quarter results, Potash went ahead and boosted its full-year 2008 guidance. It now expects to earn between $9.50 and $10.50 per share, up form the previous range of $6.25 to $7.25 per share.

Potash shares have been surging forward since early April, advancing from $165 to a high-water mark of over $215, a very snappy short-term return of more than 30%.

As it stands, shares have sold-off on news of the solid quarter. But when considering the fundamentals of this company, where it is experiencing accelerated demand, incredible pricing power and growth in production capacities, it should not be too long before its share price responds to the data and once again begins its upward ascent.

Content Courtesy: Zacks Investment Research

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