Is Nutrien Stock a Buy?

But NTR stock has struggled lately. After soaring as high as $112 in April 2022, the stock has fallen 42.6% to where it currently trades in the mid-$60 range.

Over the past five years, Nutrien shares have underperformed the market, delivering just a 20% five-year return compared to the 63% return of the S&P 500.

Nutrien stock’s dramatic increase in 2022 was largely due to the Russia-Ukraine war. Russia is one of the world’s largest fertilizer producers, and many feared that the war would cause a fertilizer shortage. But that demand spike is over, and fertilizer prices have mostly returned to normal.

As a result, Nutrien’s sales dropped 20% in the first quarter, and the company had to revise its earnings forecasts for 2023. But sales haven’t dropped much lower than they were before the war. And Nutrien is a firmly-established, highly-profitable company with a history of paying out and increasing its dividend.

So is Nutrien stock a buy?

Nutrien = Agrium + Potash

The fertilizer company was formed in 2018 after the merger of Agrium and PotashCorp. The companies combined as a way to consolidate their assets and increase lagging fertilizer prices. Nutrien, based in Saskatoon, Saskatchewan, Canada, now employs over 23,000 employees and has a market capitalization of over C$41 billion.

The company also runs over 2,000 retail locations in North and South America and Australia. These include the Nutrien Ag Solutions stores that sell seed, fertilizer, and equipment. It also includes the Landmark brand, which sells rural merchandise in Australia.

In July 2022, Nutrien announced a deal to purchase Casa Do Adubo, a Brazilian brand with a large nationwide footprint. The deal will expand the company’s annual Latin American sales to an estimated $2.2 billion.

How Does Nutrien Make Money?

Nutrien has four primary business units. The retail operations of Nutrien are collected under the Nutrien Ag Solutions umbrella. The other segments produce nearly 27 million tons of chemical fertilizer each year. These three segments are Potash, Nitrogen, and Phosphate.

The Potash and Nitrogen segments are by far the most profitable for the company. Potash is a potassium fertilizer that can be naturally harvested. This segment accounted for $676 million of the company’s 1st quarter adjusted EBITDA, 42% of Nutrien’s total quarterly EBITDA of $1.4 billion.

The Nitrogen segment brought in the same amount, $676 million, or 42%, of the company’s 1st quarter adjusted EBITDA. Nitrogen is one of the most commonly used fertilizers in crop production. Nutrien manufactures multiple nitrogen-based products, including Urea and ESN smart nitrogen.

Phosphate fertilizer is made from phosphate rocks that are broken and processed in Nutrien facilities. The company’s Phosphate segment accounted for $137 million, or 11% of Nutrien’s 1st quarter EBITDA.

The Retail Segment ended the first quarter with a loss in adjusted EBITDA of $(34) million. This loss substantially dropped from the EBITDA of $269 million in the first quarter of 2022.

Nutrien Sales & Net Income Fell

The company’s revenues were significantly lower across the board from last year. Nutrien’s total sales were down 20% from $7.66 billion in the first quarter of 2022 to $6.1 billion in the first quarter of 2023. The adjusted EBITDA for the company was $1.4 billion, but that’s down 46% from $2.6 billion in the first quarter of 2022.

Net income of $576 million was down 58% from $1.38 million in 2022. That reduced diluted EPS to $1.14 from $2.49 in 2022, a 54% decline. The decrease in sales caused management to reduce its guidance for 2023, with the company now expecting $6.5 to $8 billion in annual EBITDA instead of $8.4 to $10 million.

But Nutrien has continued to deliver for its shareholders. The company bought back 11.8 million shares in the first quarter at a value of $900 million. And Nutrien has been committed to its dividend. With a 3.3% dividend yield, the quarterly dividend currently stands at C$0.70 per share.

Nutrien has a P/E ratio of 5.06. That’s a good bit lower than the rest of the agricultural industry which is trading over 10x earnings. It’s a healthy indicator that the stock may be undervalued at this price point.

Analysts Remain Buoyant

Out of 24 analysts, 13 consider NTR a buy, and 2 analysts have the stock earmarked to outperform the market. The most bullish estimate predicts the stock will rise 43% to $92 over the next 12 months. The median forecast for NTR has the stock increasing by 15% to $74 in the coming year.

Nine analysts rate the stock as a hold. Only 2 out of 24 believe it’s time to sell NTR, with the most bearish analyst forecasting that NTR will underperform the market. This forecast predicts the stock will drop 23.8% to $49 in the next 52 weeks.

Is Nutrien Stock a Buy?

Nutrien is a fertilizer manufacturer and agricultural retailer that’s one of the largest players in the industry. The stock soared in 2022 because of the extraordinary demand for fertilizer due to the war in Ukraine.

But sales have returned to normal, and the company’s stock has fallen. Despite the decreased sales and profits, Nutrien is still a global giant that is firmly positioned in a perennial industry. There will always be weather and geopolitical factors that affect the farming industry, but the industry as a whole is expected to grow.

Given the company’s dividend history and its strong record of success, Nutrien is a solid consideration for long-term investors.