Chemical Mining Company of Chile (SQM) reported third-quarter results after the close last night and the numbers looked superficially disappointing. However, the market doesn’t seem to mind as the shares are rallying today in relief.
Drilling down into the models, it looks like consensus here failed to reflect the fact that the third quarter is historically a little soft for SQM. After all, its core business is still tied to the agricultural cycle. In that light, it was relatively unlikely that the company would be able to achieve the sequential growth that the Street was calling for. A 3%-10% decline from the second quarter was more reasonable, and that’s exactly what the market got.
From here, it looks like SQM has successfully turned its business around under extremely difficult circumstances, which means the current quarter should also be a good one. On that basis, these shares still look cheap and we may finally be getting that sustained rally I saw in the cards a few months ago. Buy SQM under $29.50.