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Compass Minerals Is Worth Its Salt

While near-term earnings are depressed, this company has strong and sustainable competitive advantages for the production of highway deicing salt and sulfate of potash specialty fertilizer.

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While unfavorable weather events are hurting  Compass Minerals' (CMP) near-term earnings, this company has strong and sustainable competitive advantages for the production of highway deicing salt and sulfate of potash specialty fertilizer. The company's rock salt mine in Goderich, Ontario, is the world's largest and has access to a deepwater port, which allows Compass to deliver salt cost-effectively to customers throughout the Great Lakes region. Further, the company's Great Salt Lake facility--one of only three solar evaporation operations in the world--allows the company to produce sulfate of potash specialty fertilizer at a much lower cost than most other producers that use ore mining or a chemical process.

We think the stock is currently depressed because the company's near-term profitability will be weighed down by a trio of unfavorable weather events: tornado damage costs and production interruptions at Goderich, rainfall-related production shortfalls at the Great Salt Lake facility, and mild winter weather in the Midwest that is hurting demand for deicing salt. Compass' earnings should grow long term as these issues are resolved and as the company expands its sulfate of potash fertilizer production and grows into its expanded rock salt capacity.

Elizabeth Collins does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.

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