Thursday, KeyBanc Capital initiated coverage of Intrepid Potash, Inc. (IPI) stock with a Hold rating. The brokerage established its 2009 EPS estimate of $0.75, and its 2010 estimate of $1.15.
Analyst Douglas Chudy believes that IPI is reasonably positioned in an attractive industry and capable of generating solid long-term organic growth. However, at current levels, the analyst feels the risk/reward profile is fairly evenly balanced from a valuation standpoint, supporting his Hold rating.
The analyst views potash market fundamentals favorably to other fertilizers, noting fewer producers, high barriers to entry and more stable input costs. The analyst sees good opportunity for Intrepid to increase production capacity through internal projects, while lowering per ton production costs over the next few years.
The analyst said that growth next year is driven by a rebound in demand and lower per ton production costs, offset in part by reduced potash prices. Favorable secular industry trends, capacity expansion projects and efficiency measures should drive attractive long-term earnings growth.
Currently, IPI is down $1.51 or 5.05% and trading at $28.39.
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