Nutrien Ltd. NTR is gaining from healthy demand for crop nutrients, its actions to reduce costs and strategic acquisitions amid headwinds from lower fertilizer prices.

NTR’s shares are down 23.5% over a year compared with a 20.5% decline recorded by its industry.

Image Source: Zacks Investment Research

 
Let’s find out why this fertilizer stock is worth retaining at the moment.

Healthy Demand, Acquisitions & Cost Cuts Aid NTR Stock

Nutrien is well-placed to benefit from higher demand for fertilizers, backed by the strength in global agriculture markets. It is seeing healthy fertilizer demand in its major markets. Strong demand in key offshore markets and low channel inventories in North America at the start of 2024 drove record potash sales volume in the first half. NTR’s phosphate sales volumes were also higher than first-half 2023 levels due to strong demand for fertilizer, industrial and feed products. First-half 2024 nitrogen sales volumes remained stable compared with the same period in 2023.

Strong grower economics, improved affordability and low inventory levels are expected to drive potash demand globally. The phosphate market is also benefiting from higher global demand and low producer and channel inventories. Demand for nitrogen fertilizer also remains healthy in major markets. Global nitrogen requirement is being driven by demand in North America, India and Brazil.

NTR should also gain from acquisitions and increased adoption of its digital platform. It continues to expand its footprint in Brazil through acquisitions. It completed several acquisitions in 2023 and is expected to continue pursuing targeted opportunities in its core markets this year.

Cost and operational efficiency initiatives are also expected to aid the company’s performance. NTR remains focused on lowering the cost of production in the potash business. The company has announced several strategic actions to reduce its controllable costs and boost free cash flow. Lower natural gas costs and reduced ammonia and sulfur input costs are also contributing to a decline in its cost of goods sold.

Weak Fertilizer Prices Weigh on Nutrien’s Margins

Softer fertilizer prices are expected to hurt the company’s performance. Prices of phosphate and potash have retreated since the back half of 2022 from their peak levels attained in the first half riding on the impacts of the Russia-Ukraine war and disruptions due to the sanctions in Belarus.

Global nitrogen prices have declined since the beginning of 2023. Higher global supply availability driven by higher global operating rates due to lower global energy costs has resulted in a decline in prices. Lower fertilizer selling prices negatively impacted NTR’s financial results in the second quarter. Lower prices are expected to hurt the company’s sales and profitability in the near term.

Nutrien Ltd. Price and Consensus

Nutrien Ltd. price-consensus-chart | Nutrien Ltd. Quote

NTR’s Zacks Rank & Other Key Picks

NTR currently carries a Zacks Rank #3 (Hold).

Better-ranked stocks in the Basic Materials space are IAMGOLD Corporation IAG, Eldorado Gold Corporation EGO and Hawkins, Inc. HWKN. While IAMGOLD and Eldorado Gold sport a Zacks Rank #1 (Strong Buy), Hawkins carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

The Zacks Consensus Estimate for IAMGOLD’s current-year earnings has increased by 46.4% in the past 60 days. IAG beat the consensus estimate in each of the last four quarters with the average surprise being 200%. Its shares have shot up roughly 163% in the past year.

The consensus estimate for Eldorado Gold’s current year earnings is pegged at $1.40 per share, indicating a year-over-year rise of 145.6%. EGO beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 430.3%. The company's shares have rallied roughly 95% in the past year.

The Zacks Consensus Estimate for Hawkins’ current fiscal-year earnings is pegged at $4.14, indicating a rise of 15.3% from year-ago levels. The Zacks Consensus Estimate for HWKN’s current fiscal-year earnings has increased 12.8% in the past 60 days. The stock has rallied around 95% in the past year.

Want the latest recommendations from Zacks Investment Research? Today, you can download 7 Best Stocks for the Next 30 Days. Click to get this free report

Iamgold Corporation (IAG) : Free Stock Analysis Report

Eldorado Gold Corporation (EGO) : Free Stock Analysis Report

Hawkins, Inc. (HWKN) : Free Stock Analysis Report

Nutrien Ltd. (NTR) : Free Stock Analysis Report

To read this article on Zacks.com click here.

Zacks Investment Research