Agrium A Play On Agri-Business

Agrium Inc. (AGU) is growing through acquisition and organic expansion. The acquisition of United Agri-Products (UAP) is driving revenues and profits supported by an expanded product line in the major business segment.

Agrium announced record results for third quarter earnings, with net earnings for the third quarter of 2008 of $367-million ($2.31 diluted earnings per share) more than four times the previous third quarter record achieved in 2004 and more than seven times above the $51-million ($0.38 diluted earnings per share) in the third quarter of 2007.

The third quarter results include non-qualifying natural gas and power hedge losses of $171-million ($0.73 diluted earnings per share) and a recovery in stock-based compensation of $99-million ($0.42 diluted earnings per share). Retail results are not directly comparable to the same period last year due to the inclusion of UAP which was acquired in May of 2008.

Rising global prices for nitrogen, potash and phosphate leveraged by strong demand augur well for AGU. The company also has a significant free cash flow. Therefore, we rate the shares a Buy with a target of $40.

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