An irreverent look at Wall Street
Barclay's 10/6After MOS' Q1/f2011 conference call, we are increasing our target price to $60/sh from $54/sh to reflect higher expected sales volumes in its phosphates division along with lower corporate taxes.No Impact to Phosphate Sales Volumes Expected in f2011: On the conference call, MOS provided its contingency plan for the potential shortfall in phosphate rock and finished phosphates expected in the second half of its fiscal year from the injunction at its South Fort Meade mine. Most importantly, MOS highlighted that through its contingency plans it does not expect a material impact to finished phosphate sales volumes - a change from its previous call where it laid out a worst case scenario of losing 1 mln tonnes of finished phosphate sales in the current fiscal year. We have updated our model to reflect this new development which is a net positive for MOS.Outlook - Ramping up Guidance for Q2: MOS provided guidance for Q2 that included an increase in both volumes and price for both potash and phosphate over Q1 numbers. Phosphate sales volumes are expected to increase to 3.3 - 3.6 million tonnes with a projected price range of $430 - $460/t for DAP. On the potash side, volumes are expected to increase to 1.6 - 1.9 million tonnes while the guided price range moves up slightly to $310-$340/t. The company noted that the higher commodity prices in the spot market today will be reflected in fQ3 earnings results. The company also lowered its corporate tax rate guidance down to the mid to upper 20% range from 30%.
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