By Marcus E. Howard Jan 21 (Reuters) - If a big snowstorm materializes this week in the U.S. Northeast, it will not just be school children and ski resort owners who rejoice: executives at salt producer Compass Minerals may be relieved, too.
SOME SELLING POINTS Compass, which also operates in Canada and the United Kingdom, is unworried.
"What we've seen so far is just a bump in the road, not a fundamental shift in long-term demand," said company spokeswoman Tara Hart.
The shares were trading Thursday at $70.83, slightly above a 52-week low reached this week, like thousands of other stocks in the January selloff. That leaves some analysts seeing value.
The company's cost-cutting measures and other factors could attract investors despite winter's late start. The company trades at roughly 11 times trailing earnings and pays a 3.35-percent dividend, according to Thomson Reuters data. That is a solid yield at a time when 10-year Treasuries are paying 2 percent a year.
Downside is limited. Roughly 70 percent of Compass' salt sales go to states, municipalities and other entities responsible for road maintenance and those customers tend to sign fixed contracts for salt purchases in the summer so there is a floor under how far orders can drop in one season.
Still, salt demand topped BB&T Capital Markets' list of risks associated with investment in Compass Minerals, though it nonetheless has a "buy" rating on the company, based on earnings and free cash flow potential.
BB&T remains focused on positives - Compass owns the world's largest salt mine, for example, and faces limited competition in a concentrated market. Compass, Germany's K&S AG, and privately held Cargill, together provide roughly 75 percent of North American road salt. BB&T is telling investors to stick with the company despite what is expected to be a weak earnings report.
"We still think it's a buy," said Garrett Nelson, a BB&T research analyst. "It's just that their near-term earnings are going to be a lot weaker." (Reporting by Marcus E. Howard; editing by Linda Stern and Nick Zieminski)