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Mike Wilson, Agrium CEO (TODD KOROL)
Mike Wilson, Agrium CEO (TODD KOROL)

Eye on Equities

Whiff of trouble in fertilizer stocks Add to ...

It might be time to take some money out of the fertilizer sack.

Desjardins Securities analyst John Hughes downgraded Agrium Inc. to a “hold” on Thursday now that shares of the specialty fertilizer producer have run up substantially.

There is “lots of positive news already priced into Agrium’s shares,” Mr. Hughes cautioned in a report. “In the year to date, Agrium’s shares have increased 33 per cent compared with a decrease of 3.4 per cent for the TSX Composite.”

The U.S. Department of Agriculture, in its monthly supply-and-demand report, slashed its corn-yield forecast on Wednesday to 146 bushels an acre from 166 bushels due to a severe drought in the U.S. midwest. The reduction was lower than what economists expected.

“Any return to more normalized weather patterns in the U.S. corn belt should allow the USDA yield forecast to be met or exceeded,” suggested Mr. Hughes. “Of course, this remains the real bet going forward. Will there be rain or no rain in the U.S. midwest through July and into August, or will the drought conditions continue?

“In our view, the risk of betting on the weather over the next few weeks versus monetizing any profit in Agrium’s shares is too great.”

Downside: The analyst, who downgraded the stock to a “hold” from a “buy” rating, maintains his one-year target of $106.30 a share.


Great Canadian Gaming Corp.
The gaming operator recently announced a refinancing and also a substantial issuer bid to purchase and cancel up to $100-million worth of common shares, said TD Securities analyst Damir Gunja. He assumes a full take-up of the issuer bid by next month.

Upside: He raised his one-year target to $11.50 a share from $9.50 , but maintains a “hold” rating.


Semafo Inc.
BMO Nesbitt Burns analyst Andrew Breichmanas downgraded the gold miner to “market perform” from “outperform” following a disappointing reserve and resource update from its $38.5-million exploration program at its Mana mine in west Africa.

Downside: The analyst cut his one-year target to $5 a share from $7.75.


Fortress Paper Ltd.
TD Securities analyst Sean Steuart cut his target price on the specialty paper producer because of dilution from a recent financing and lower price forecasts for dissolving pulp.

Downside: He lowered his one-year target to $20 a share from $26, but maintains a “hold” rating.


Rosetta Resources Inc.
The oil and gas company has underperformed its exploration and production peers recently due to falling price of natural gas liquids, said Canaccord Genuity analyst John Gerdes. However, he believes the commodity price is stabilizing, and Rosetta is not getting credit for its increasing shift to oil.

Upside: He maintains his “buy” rating, but raised his one-year target to $64 (U.S.) from $62.

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