Nutrien (NTR) gains strength in demand amid unfavorable price movements

Nutrien limited liability company NTR is expected to benefit from higher crop nutrient demand, cost reduction efforts and strategic acquisitions. However, weaker fertilizer prices will likely weigh on its results.

Shares of the fertilizer maker are down 4.1% for the year, compared with a 5.3% gain seen by the industry.

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Nutrien is well positioned to benefit from increased demand for fertilizers, supported by strength in global agricultural markets. It is seeing strong demand in its core markets, particularly in North America. NTR sales volumes in North America increased in the first quarter of 2024 due to lower channel inventories and more typical purchasing behavior. Offshore sales volumes also saw growth due to increased demand in key international markets.

Strong grower economics, improved affordability and low inventory levels are expected to increase demand for potash globally. The phosphates market is also benefiting from higher global demand and low manufacturer inventories and distribution channels. Demand for nitrogen fertilizers also remains high in major markets. Global demand for nitrogen is driven by demand in North America, India and Brazil.

The company should also benefit from acquisitions and increased use of its digital platform. It continues to expand its presence in Brazil through acquisitions. NTR completed a number of acquisitions in 2023 and expects to continue to pursue targeted opportunities in its core markets this year.

Cost and operational efficiency initiatives are expected to support the company’s performance. The focus remains on reducing production costs in the potash industry. The company also announced a number of strategic actions aimed at reducing controllable costs and increasing free cash flow. Lower prices of natural gas also reduce its cost of sales.

However, lower fertilizer prices are expected to hurt NTR’s results. Phosphate and potash prices are falling from the second half of 2022 from the highest levels reached in the first half due to the impact of the Russia-Ukraine war and disruptions caused by sanctions in Belarus. Global nitrogen prices have fallen since early 2023 as global supply availability increases. The decline in net selling prices of fertilizers had a negative impact on the company’s financial results in the first quarter. Lower prices are expected to impact the company’s sales and profitability in the near term.

Nutrien Ltd. Price and consensus

Nutrien Ltd. Price Consensus Chart | Quote Nutrien Ltd

Stocks to consider

The better-ranked companies in the basic materials area include, among others: Axalta Coating Systems Ltd. AXTA, Carpentry Technology Company National Council of the Judiciary and ATI company ATi.

Carpenter Technology is currently sporting a Zacks Rank #1 (Strong Buy). CRS has surpassed the Zacks Consensus Estimate in three of the trailing four quarters while matching it once, with an average earnings surprise of 15.1%. The company’s shares are up about 139% over the past year. You can see complete list of today’s Zacks #1 ranked stocks here.

A Zacks Rank #1 Axalta Coating Systems has an expected earnings growth rate of 26.8% for the current year. Over the last 60 days, AXTA’s consensus earnings estimate for the current year has been revised upwards by 5.9%. The company’s shares have gained about 18% over the past year.

ATI is currently sporting a Zacks Rank #2 (Buy). ATI has topped the Zacks Consensus Estimate in each of the trailing four quarters, with the average earnings surprise coming in at 8.3%. The company’s stock is up about 73% over the past year.

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