Canaccord Says Buy Monsanto, Agrium Over Mosaic

Canaccord issued an agriculture report on Mosaic Co MOS Thursday and forecasted that Monsanto Company MON and Agrium Inc. AGU will be outperformers in comparison.

The firm maintained a Hold rating on Mosaic with a $45 price target due to a "lack of activity related to our potash equities under coverage. We expect a relatively small increase ($15/t) in the Chinese potash contract by the end of Q4, and relatively inactive pricing in 2015 and only modest volume gains," according to analyst Keith Carpenter.

Carpenter noted that "Mosaic reported Q3/14 adjusted EPS of US$0.56 versus our and consensus estimate of US$0.58. Total adjusted company gross margin of US$438 million was largely in line with our US$432 million estimate."

"Over the medium term, we believe the oversupply situation that exists in the potash market will become worse as projects that are currently being built out enter production in the coming years. This should provide sufficient headwinds to any potash pricing escalation potential as well as cap both MOS’ and POT’s respective market share potential as we believe other entities have been and will continue to act more aggressively in securing sales."

The report concluded that "both Monsanto and Agrium offer the better torque (fundamentals) over the next two years when compared to 2013/14 in both EPS and FCF and we expect the biggest torque in further capital being returned to shareholders in 2016 and beyond to also be from Monsanto and Agrium."

The firm maintained a Buy rating on Monsanto Company with a $149 price target; Shares recently traded at $114.30, up 0.62 percent.

The firm maintained a Buy rating on Agrium Inc. with a $105 price target; Shares recently traded at $97.21, up 0.63 percent.

Mosaic Company recently traded at $44.10, up 1.8 percent.