Oppenheimer Comments On Compass Material Dismal Earnings

Compass Material CMP reported 4Q10 adjusted EPS of $1.70, down 9.3% yoy, $0.08 below Oppenheimer's estimate. Significant volume improvement and better than expected pricing in Specialty Fertilizer were offset by lower margins. Compass expects SOP pricing to improve with 1Q11 at ~$575/ton, driven by the implementation of $80/ton increases announced in 4Q10 and higher-priced SOP from Big Quill, anticipates SOP demand at 400,000 tons, and sees SOP production costs dropping $10/ton in 2011. For Salt, margins will continue to be under pressure in 1Q11 but should improve for the remainder of 2011 as production normalizes. GAAP EPS was $1.83 and included $0.05 of one-time costs related to replacing the company's revolving credit facility and extending the maturity on a portion of its term loan, and a one-time $0.18 benefit related to resolving uncertain tax positions. 4Q10 sales grew 14.1% yoy to $356.3M, in line with estimate. Salt grew 4.9% yoy, and was 5% below estimate, with no significant effect of variation from normal weather. Specialty Fertilizer advanced 115.2% and was 36% above estimate. Oppenheimer has a Perform rating on CMP CMP closed Tuesday at $94.40