Morningstar | Compass Shares Continue Free-Fall, but Our Long-Term Outlook Remains Intact
Compass Minerals shares fell nearly 13.4% to $47.38 per share on Oct. 24, continuing the slide from a day earlier, when shares dropped over 19% after the company slashed 2018 annual earnings guidance because of lower-than-expected salt production at the Goderich mine. In addition to the reduced guidance, an analyst downgrade compounded the bad news for the stock.We think the market is trying to grasp the longer-term implications for Compass’ salt operations and may be incorrectly assuming that the problems at the low-cost mine represent a new normal for the company’s earnings power. However, we contend that the Goderich mine's operational issues are temporary and forecast that Compass will be able to restore full low-cost salt production over the next year.
With no changes to our outlook, we maintain our $81 per share fair value estimate for wide-moat Compass.
Compass Minerals will release earnings on Oct. 31, with a conference call on Nov. 1, when we expect management to provide more details on the operational issues plaguing Goderich salt production as well as a timeline for when investors can expect these issues to subside.
Compass Minerals International is a holding company. Through its wholly owned subsidiaries, the company is a provider of minerals, including salt, secondary nutrients and micronutrients, and specialty chemicals. The company has three reportable segments: Salt, which produces, markets and sells salt and magnesium chloride and sodium chloride; Plant Nutrition North America, which includes sales of sulfate of potash specialty fertilizer and specialty plant nutrients; and Plant Nutrition South America, which manufactures, distributes and markets an array of specialty plant nutrients and supplements developed and formulated from primary and secondary nutrients, specialty plant nutrients and biostimulants.
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Morningstar provides data on approximately 530,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 18 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries and had approximately $185 billion in assets under advisement and management as of June 30, 2016.
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