Why Raymond James Downgraded Potash: Not The First To See Red Flags?

In a report issued Wednesday, Raymond James analysts Steve Hansen and Daniel Chew downgraded their rating on shares of Potash Corp./Saskatchewan (USA) (NYSE: POT) from Outperform to Market Perform after seeing "red flags rising." The firm trimmed its price target from $36.00 to $30.00.

The demotion follows a “difficult (compressed) spring application period wherein North American potash prices endured a sharp correction in response to lackluster demand and a surge in international imports.” 

In this context, while global shipments remain strong and a falling Canadian dollar means well for the company’s cost structure, the experts think the confluence of recent demand and pricing headwinds is concerning. Thus, they recommend investors be cautious regarding this name in the second half of the year.

Potash will report its second quarter financial results on Thursday.

Ahead of the print, the firm trimmed its estimates for the quarter; the analysts are now modeling earnings of $0.49 per share (down from a previous $0.50), below the Street’s consensus of $0.53 per share.

For the full year, the estimate was cut from $1.85 per share to $1.75 per share; for 2016, they project EPS of $2.00, down from a previous estimate of $2.15.

Others Saw The Red Flags

Raymond James was not the first research firm to see the issues at Potash. Over the past four months, not one major Wall Street research firm gave it a positive rating according to TipRanks.

TD Securities, BMO Capital, Canaccord, Cowen & Co. and Miller Tabak all maintain Hold ratings on the stock.