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4 Top Fertilizer Stocks to Snap Up From a Prospering Industry
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The Zacks Fertilizers industry is benefiting from strong demand and pricing for major crop nutrients including phosphate and potash. The underlying strength of the agricultural market, higher crop commodity prices and healthy farm economics are driving demand for fertilizers globally.
Industry players like Nutrien Ltd. (NTR - Free Report) , The Mosaic Company (MOS - Free Report) , The Scotts Miracle-Gro Company (SMG - Free Report) and CF Industries Holdings, Inc. (CF - Free Report) are poised to gain from higher demand for fertilizers in the major markets. Factors like healthy farm income and expectations of increased planted acres are expected to drive demand globally in the near term.
About the Industry
The Zacks Fertilizers industry comprises producers, distributors and marketers of crop nutrients for the global agriculture industry. Companies in this space offer nutrients such as phosphates, potash, nitrogen fertilizers, including urea, ammonia and urea ammonium nitrate. They also offer other nitrogen products to help farmers improve crop yield.
What’s Shaping the Future of the Fertilizers Industry
Solid Crop Nutrient Demand and Pricing Dynamics: The companies in the fertilizers space are well placed to benefit from strong global demand and prices for major crop nutrients. Notably, demand for fertilizers in the United States is likely to be fueled by solid farm profits and higher planted acreage. Strong farmer economics are also expected to support demand in major markets such as Brazil and India. Meanwhile, phosphate markets are likely to remain robust in the near term on solid demand and pricing dynamics. Tight availability along with firm demand is driving up phosphate prices globally. Potash prices have also strengthened on the back of robust global demand, aided by strong grower economics, higher crop prices and low global inventory levels. Demand for nitrogen fertilizer also remains healthy in major markets. Global nitrogen requirement is being driven by demand in North America, India and Brazil. Healthy corn acres in the United States are expected to spur up nitrogen demand in North America. Moreover, demand for urea imports into Brazil and India remains favorable. Lower global supply availability and a spike in energy prices are also likely to boost nitrogen prices.
Agricultural Fundamentals Remain Healthy: While the coronavirus pandemic stung a vast spectrum of industries, agriculture was left relatively unscathed given the sustained rise in food demand globally. Moreover, strong global demand coupled with tightened supply have provided a boost to crop commodity prices. Notably, prices of corn and soybean have rallied to multi-year highs. Higher agricultural commodity prices augur well for crop nutrient demand over the near term. Expectations of higher planted corn and soybean acres globally this year on the back of higher crop prices also suggest a pickup in fertilizer demand.
Strong Farm Economics: Farm economics have strengthened in the United States on the back of government support and a spike in crop commodity prices. Per the U.S. Department of Agriculture’s (“USDA”) latest outlook, net farm income is projected to be $111.4 billion in 2021. While net farm income is forecast to decline 8.1% from the 2020 level due to lower federal payments to farmers, it would still be 21% higher than its 2000-19 average, based on USDA projections. Notably, farm profits surged to their highest level in seven years in 2020 on the back of record levels of federal payments in the wake of the pandemic. Notwithstanding the expected year-over-year decline, solid farm income backed by higher agricultural commodity prices is likely to drive farmers’ spending on crop nutrients this year.
Zacks Industry Rank Reflects Upbeat Prospects
The Zacks Fertilizers industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #35, which places it at the top 14% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates a bright near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Tops Sector & S&P 500
The Zacks Fertilizers industry has outperformed both the Zacks S&P 500 composite and the broader Zacks Basic Materials sector over the past year.
The industry has gained 77.1% over this period compared with the S&P 500’s rise of 35.8% and the broader sector’s increase of 65%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of trailing 12-month enterprise value-to EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing fertilizer stocks, the industry is currently trading at 13.47X compared with the S&P 500’s 17.13X and the sector’s 9.48X.
In the past five years, the industry has traded as high as 21.97X and as low as 6.04X, with a median of 10.53X, as the chart below shows.
Enterprise Value/EBITDA (EV/EBITDA) Ratio
Enterprise Value/EBITDA (EV/EBITDA) Ratio
4 Fertilizer Stocks to Keep a Close Eye on
Mosaic: The Florida-based company is a leading producer and marketer of concentrated phosphate and potash for the global agriculture industry. The company is well positioned to leverage increasing global demand for fertilizers and higher realized prices in its businesses. It is also taking measures to cut costs amid a still-challenging operating environment. Its actions to improve its operating cost structure through transformation plans are expected to boost profitability. Transformational savings are also expected to drive margins in its Mosaic Fertilizantes segment.
Mosaic sports a Zacks Rank #1 (Strong Buy). It has expected earnings growth of 177.7% for the current year. The Zacks Consensus Estimate for current-year earnings for the company has moved up 87.3% in the past 60 days. The stock has also rallied around 73% over the past six months.
Price and Consensus: MOS
Scotts Miracle-Gro: This Marysville, OH-based company is a leading producer and marketer of branded garden and consumer lawn products. Notably, it is one of the world’s leading marketers of indoor and hydroponic growing products. The company is likely to gain from strong retailer support in its U.S. Consumer segment and continued strong momentum in the Hawthorne division. Moreover, it will benefit from the synergies of the Sunlight Supply acquisition. The buyout creates unique competitive advantages for the Hawthorne division.
Scotts Miracle-Gro carries a Zacks Rank #2 (Buy). It has expected earnings growth of 22.1% for the current fiscal. The consensus estimate for earnings for the current fiscal has been revised 7.2% upward over the last 60 days. The stock has also gained roughly 23% over the over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: SMG
CF Industries: The Illinois-based company is a leading global manufacturer of nitrogen and hydrogen products for fertilizer, clean energy, emissions abatement and other industrial applications. The company should benefit from higher nitrogen fertilizer demand in major markets. Higher nitrogen prices are also expected to support the company’s bottom line. CF Industries also remains committed to boost shareholders’ value by leveraging strong cash flows.
The company, carrying a Zacks Rank #2, has expected earnings growth of 38.1% for the current year. The Zacks Consensus Estimate for the current year has been revised 47.1% upward over the last 60 days. The stock has also gained around 55% in the past six months.
Price and Consensus: CF
Nutrien: This Canada-based company is a leading provider of crop inputs and services. The company should benefit from solid demand and higher prices for fertilizers, especially potash. It is expected to gain from strong potash sales volumes this year on the back of solid domestic and overseas demand. Nutrien is also well placed to gain from acquisitions, cost efficiency and increased adoption of its digital platform. The company also continues to grow its footprint in Brazil through acquisitions, including Tec Agro.
Nutrien currently carries a Zacks Rank #3 (Hold). It has expected earnings growth of 46.1% for the current year. The consensus estimate for current-year earnings has moved up 20.6% in the past 60 days. The stock has also gained around 46% in the past six months.
Price and Consensus: NTR
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
Image: Bigstock
4 Top Fertilizer Stocks to Snap Up From a Prospering Industry
The Zacks Fertilizers industry is benefiting from strong demand and pricing for major crop nutrients including phosphate and potash. The underlying strength of the agricultural market, higher crop commodity prices and healthy farm economics are driving demand for fertilizers globally.
Industry players like Nutrien Ltd. (NTR - Free Report) , The Mosaic Company (MOS - Free Report) , The Scotts Miracle-Gro Company (SMG - Free Report) and CF Industries Holdings, Inc. (CF - Free Report) are poised to gain from higher demand for fertilizers in the major markets. Factors like healthy farm income and expectations of increased planted acres are expected to drive demand globally in the near term.
About the Industry
The Zacks Fertilizers industry comprises producers, distributors and marketers of crop nutrients for the global agriculture industry. Companies in this space offer nutrients such as phosphates, potash, nitrogen fertilizers, including urea, ammonia and urea ammonium nitrate. They also offer other nitrogen products to help farmers improve crop yield.
What’s Shaping the Future of the Fertilizers Industry
Solid Crop Nutrient Demand and Pricing Dynamics: The companies in the fertilizers space are well placed to benefit from strong global demand and prices for major crop nutrients. Notably, demand for fertilizers in the United States is likely to be fueled by solid farm profits and higher planted acreage. Strong farmer economics are also expected to support demand in major markets such as Brazil and India. Meanwhile, phosphate markets are likely to remain robust in the near term on solid demand and pricing dynamics. Tight availability along with firm demand is driving up phosphate prices globally. Potash prices have also strengthened on the back of robust global demand, aided by strong grower economics, higher crop prices and low global inventory levels. Demand for nitrogen fertilizer also remains healthy in major markets. Global nitrogen requirement is being driven by demand in North America, India and Brazil. Healthy corn acres in the United States are expected to spur up nitrogen demand in North America. Moreover, demand for urea imports into Brazil and India remains favorable. Lower global supply availability and a spike in energy prices are also likely to boost nitrogen prices.
Agricultural Fundamentals Remain Healthy: While the coronavirus pandemic stung a vast spectrum of industries, agriculture was left relatively unscathed given the sustained rise in food demand globally. Moreover, strong global demand coupled with tightened supply have provided a boost to crop commodity prices. Notably, prices of corn and soybean have rallied to multi-year highs. Higher agricultural commodity prices augur well for crop nutrient demand over the near term. Expectations of higher planted corn and soybean acres globally this year on the back of higher crop prices also suggest a pickup in fertilizer demand.
Strong Farm Economics: Farm economics have strengthened in the United States on the back of government support and a spike in crop commodity prices. Per the U.S. Department of Agriculture’s (“USDA”) latest outlook, net farm income is projected to be $111.4 billion in 2021. While net farm income is forecast to decline 8.1% from the 2020 level due to lower federal payments to farmers, it would still be 21% higher than its 2000-19 average, based on USDA projections. Notably, farm profits surged to their highest level in seven years in 2020 on the back of record levels of federal payments in the wake of the pandemic. Notwithstanding the expected year-over-year decline, solid farm income backed by higher agricultural commodity prices is likely to drive farmers’ spending on crop nutrients this year.
Zacks Industry Rank Reflects Upbeat Prospects
The Zacks Fertilizers industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #35, which places it at the top 14% of more than 250 Zacks industries.
The group’s Zacks Industry Rank, which is basically the average of the Zacks Rank of all the member stocks, indicates a bright near term. Our research shows that the top 50% of the Zacks-ranked industries outperforms the bottom 50% by a factor of more than 2 to 1.
Before we present a few stocks that you may want to consider for your portfolio, let’s take a look at the industry’s recent stock-market performance and valuation picture.
Industry Tops Sector & S&P 500
The Zacks Fertilizers industry has outperformed both the Zacks S&P 500 composite and the broader Zacks Basic Materials sector over the past year.
The industry has gained 77.1% over this period compared with the S&P 500’s rise of 35.8% and the broader sector’s increase of 65%.
One-Year Price Performance
Industry’s Current Valuation
On the basis of trailing 12-month enterprise value-to EBITDA (EV/EBITDA) ratio, which is a commonly used multiple for valuing fertilizer stocks, the industry is currently trading at 13.47X compared with the S&P 500’s 17.13X and the sector’s 9.48X.
In the past five years, the industry has traded as high as 21.97X and as low as 6.04X, with a median of 10.53X, as the chart below shows.
Enterprise Value/EBITDA (EV/EBITDA) Ratio
Enterprise Value/EBITDA (EV/EBITDA) Ratio
4 Fertilizer Stocks to Keep a Close Eye on
Mosaic: The Florida-based company is a leading producer and marketer of concentrated phosphate and potash for the global agriculture industry. The company is well positioned to leverage increasing global demand for fertilizers and higher realized prices in its businesses. It is also taking measures to cut costs amid a still-challenging operating environment. Its actions to improve its operating cost structure through transformation plans are expected to boost profitability. Transformational savings are also expected to drive margins in its Mosaic Fertilizantes segment.
Mosaic sports a Zacks Rank #1 (Strong Buy). It has expected earnings growth of 177.7% for the current year. The Zacks Consensus Estimate for current-year earnings for the company has moved up 87.3% in the past 60 days. The stock has also rallied around 73% over the past six months.
Price and Consensus: MOS
Scotts Miracle-Gro: This Marysville, OH-based company is a leading producer and marketer of branded garden and consumer lawn products. Notably, it is one of the world’s leading marketers of indoor and hydroponic growing products. The company is likely to gain from strong retailer support in its U.S. Consumer segment and continued strong momentum in the Hawthorne division. Moreover, it will benefit from the synergies of the Sunlight Supply acquisition. The buyout creates unique competitive advantages for the Hawthorne division.
Scotts Miracle-Gro carries a Zacks Rank #2 (Buy). It has expected earnings growth of 22.1% for the current fiscal. The consensus estimate for earnings for the current fiscal has been revised 7.2% upward over the last 60 days. The stock has also gained roughly 23% over the over the past six months. You can see the complete list of today’s Zacks #1 Rank stocks here.
Price and Consensus: SMG
CF Industries: The Illinois-based company is a leading global manufacturer of nitrogen and hydrogen products for fertilizer, clean energy, emissions abatement and other industrial applications. The company should benefit from higher nitrogen fertilizer demand in major markets. Higher nitrogen prices are also expected to support the company’s bottom line. CF Industries also remains committed to boost shareholders’ value by leveraging strong cash flows.
The company, carrying a Zacks Rank #2, has expected earnings growth of 38.1% for the current year. The Zacks Consensus Estimate for the current year has been revised 47.1% upward over the last 60 days. The stock has also gained around 55% in the past six months.
Price and Consensus: CF
Nutrien: This Canada-based company is a leading provider of crop inputs and services. The company should benefit from solid demand and higher prices for fertilizers, especially potash. It is expected to gain from strong potash sales volumes this year on the back of solid domestic and overseas demand. Nutrien is also well placed to gain from acquisitions, cost efficiency and increased adoption of its digital platform. The company also continues to grow its footprint in Brazil through acquisitions, including Tec Agro.
Nutrien currently carries a Zacks Rank #3 (Hold). It has expected earnings growth of 46.1% for the current year. The consensus estimate for current-year earnings has moved up 20.6% in the past 60 days. The stock has also gained around 46% in the past six months.
Price and Consensus: NTR
These Stocks Are Poised to Soar Past the Pandemic
The COVID-19 outbreak has shifted consumer behavior dramatically, and a handful of high-tech companies have stepped up to keep America running. Right now, investors in these companies have a shot at serious profits. For example, Zoom jumped 108.5% in less than 4 months while most other stocks were sinking.
Our research shows that 5 cutting-edge stocks could skyrocket from the exponential increase in demand for “stay at home” technologies. This could be one of the biggest buying opportunities of this decade, especially for those who get in early.
See the 5 high-tech stocks now>>