The devastating floods in the midwest are making Terra Industries (TRA) a top pick for Citi. The floods have destroyed significant corn crops, driving the price of corn to $7 a bushel and lowering estimated inventories. Citi expects US farmers to respond by shifting acreage back into fertiliser intensive corn next spring, which implies stronger earnings from TRA over the next year.
Citi sees three key catalysts:
We see catalysts from 1) the lagging Street earnings estimate of
$4.58 in ’09 vs our estimate of $5.53; 2) potential unwinding of the 25 mln shares
of short interest vs. 91 mln shares outstanding; and 3) continuing strength in
nitrogen product prices.
Citi reiterates BUY, target price $62.
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