Canadian fertilizer maker, Agrium Inc. AGU said that its Crop Production Services (CPS) Ag-retail business has landed a binding purchase deal with Southern States Cooperative, Inc. Under the pact, Agrium will buy Southern States Cooperative's 20 Ag-retail locations in Georgia and Florida and its integrated cotton ginning business in Statesboro, GA. Financial terms of the deal were not divulged.
The deal, which is subject to customary closing conditions, is expected to consummate in September 2017. Expected annual sales from these locations are more than $100 million.
Agrium remains actively focused on expanding its retail distribution network in the United States, partly through strategic acquisitions. The buyout of Southern States Cooperative’s businesses will enable the company to further leverage its presence in Georgia and Florida.
Agrium has a strong pipeline of potential retail acquisitions. These acquisitions will help the company to grow its market share in the United States.
Agrium has outperformed the industry it belongs to over the past six months. The company’s shares have lost around 0.9% over this period, compared with roughly 4.5% decline recorded by its industry.
Agrium’s adjusted earnings for second-quarter 2017 beat the Zacks Consensus Estimate. Sales fell modestly year over year, but topped expectations.
Agrium should benefit from its strategic acquisitions, capacity expansion and cost reduction actions. The proposed merger with Potash Corp. POT should also create significant cost and operational synergies. The integrated company is expected to generate as much as $500 million of annual operating synergies.
However, Agrium has lowered the top end of its earnings guidance for 2017 due to an expected weak nitrogen pricing environment and the challenging spring weather conditions which impacted North American Retail crop nutrient margins and sales volumes. The company now sees earnings for the year to be in the range of $4.75 to $5.25 per share compared with $4.75 to $5.75 per share it expected earlier.
Agrium currently carries a Zacks Rank #3 (Hold).
Stocks to Consider
Better-placed companies in the basic materials space include The Chemours Company CC and Kraton Corporation KRA, both sporting a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
Chemours has an expected long-term earnings growth of 15.5%.
Kraton has an expected earnings growth of 7.2% for the current year.
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