Compass Minerals’ (CMP) stock has fallen 15% since the company reported a second consecutive year of poor salt results in February. Shares now trade just above a seven-year low, implying a future that looks much like the recent past: warm winters, weak salt demand, and depressed profits. Has climate change impaired Compass Minerals’ franchise? Our analysis of 120 years of weather data across the company’s 10 key markets suggests climate change is to blame for recent weakness, but only in the sense that it has increased weather volatility. In fact, the “normal” winter isn’t much warmer than 20 years ago. Warming is likely to continue, and we estimate a normal winter will bring 4% fewer snow days a decade from now. In the near term, however, a bounceback in snowfall, salt demand, and profits is more likely than not. Winter is coming, and we think Compass shares are significantly undervalued.
Seth Goldstein, CFA does not own shares in any of the securities mentioned above. Find out about Morningstar's editorial policies.