Morningstar | We Maintain Our Outlook and $81 FVE as Compass Minerals Appoints New CEO; Shares Undervalued
On April 23, Compass Minerals announced that Kevin Crutchfield will become CEO and sit on the board of directors effective May 7. Compass has been without a permanent CEO since Fran Malecha resigned in November. Since then, lead director Dick Grant has been interim CEO. Grant will become board chairman once Crutchfield becomes CEO.Crutchfield brings over 30 years of mining experience to Compass, having most recently served as CEO of Contura Energy, a U.S. coal miner, since its inception in 2016. Before that, he was CEO of Alpha Natural Resources from 2009 to 2016.
Given Crutchfield's wealth of experience, we see no reason to change our Standard stewardship rating at this time. We view the appointment as strategically sound from an operational standpoint. The coal industry has long used continuous miners as a tool to manage unit production costs. We expect Crutchfield to oversee the continued ramp-up of salt production at the low-cost Goderich mine using continuous miners. We continue to forecast that Compass will be able to fully restore production and profitability at Goderich. With no changes to our outlook, we maintain our $81 fair value estimate. Our wide moat rating, underpinned by Compass' cost-advantaged salt production, is also unchanged.
We continue to view Compass as materially undervalued, with the stock trading firmly in 4-star territory. At current prices, we see roughly 40% upside relative to our $81 fair value estimate.
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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