Shares of Potash Corp. jumped Monday as an analyst upgraded the fertilizer company, citing an improved global demand outlook for potash in 2010.
Shares climbed $4.78, or 4.1 percent, to $121.84.
Goldman Sachs analyst Robert Koort said signs point to a return in global demand and Potash "offers the most attractive way to play a potash recovery."
Another likely positive market driver includes the impending China contract settlement. As the largest buyer and lowest-cost importer of potash, China sets the floor on global fertilizer pricing. Delays in settling a 2009 contract have now evolved into working toward a 2010 contract, Koort said.
"Given recent improved demand trends, including higher prices in the Chinese domestic markets, we believe the risk of a damaging contract settlement is diminishing," he said.
Koort expects the final settlement to set off a global demand spurt as buyers come out of the woodwork to secure potash for 2010.
Additionally, 2010 demand recovery in the U.S. could exceed expectations with "staggering year-over-year percent increases in volume," given the severity of the 2009 reduction and the unusually weak consumption levels this past fall, Koort said.
Koort upgraded Potash to "Buy" from "Neutral," with a price target of $140. He also raised his 2010 earnings estimate to $8.25 per share from $7.50 per share. Analysts polled by Thomson Reuters predict a profit of $9.57 per share.
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