Nutrien ( NTR Quick Quote NTR - Free Report) is benefiting from soaring fertilizer prices and a hot agriculture market. This Zacks Rank #1 (Strong Buy) is expected to grow its earnings by 178% this year. Nutrien is the world's largest provider of crop inputs and services. It produces around 27 million tonnes of potash, nitrogen and phosphate products world-wide. It also has a significant agribusiness, including its retail segment, Nutrien Ag Solutions. Weather and Natural Gas Prices Disrupt the Fertilizer Market Agricultural fertilizers, which includes the nitrogen fertilizers of ammonia and urea, as well as potash and phosphates, have seen soaring prices in 2021. The record prices are a result of a combination of events including Hurricane Ida shutting down nitrogen plants in Louisiana, difficulty with logistics, soaring natural gas prices in Europe leading to shutdown of nitrogen production there, and China restricting phosphate and urea exports. The result is record high prices in some fertilizers which were last seen during the golden 2008 rally. But this time around, these "events" which have pushed up prices, are expected to continue to impact the market until the beginning of 2022, and maybe beyond. Several fertilizer producers, including Nutrien, closed facilities in Louisiana during Hurricane Ida. That production has slowly been coming back online. At the same time, soaring natural gas prices forced CF Industries to shut 2 of its nitrogen plants in the United Kingdom, which only came back online after intervention from the British government. Other nitrogen producers apparently remain closed throughout Europe. A Fertilizer Shortage? On Sep 22, Nutrien told Reuters that it was sold out of its potash production in the third quarter in North America even though the company increased potash production earlier in the year. And farmers, faced with record high fertilizer prices, may buy less or change crops to try and keep fertilizer costs down which could also impact sales volumes. Analysts Raise 2021 and 2022 Earnings Estimates In the face of the record high prices and all the industry disruptions, the analysts are still bullish on Nutrien. One estimate was raised in the last week for 2021 and 2 are higher in the last month. The 2021 Zacks Consensus Estimate has jumped to $5.01 from $4.93 in the prior 30 days and is up from $3.75 just 3 months ago. That's earnings growth of 178% as the company only made $1.80 last year as the pandemic hit. For 2022, 3 estimates have been raised in the last month, pushing the Zacks Consensus up to $5.83 from $5.43 in the last 30 days. That's another 16% earnings growth. Shares at All-Time Highs Nutrien has only been a public company since 2018, when Agrium merged with Potash to form Nutrien. But shares are up 48.2% on the strong agriculture market and rising fertilizer prices. This is a new high for Nutrien shares. Image Source: Zacks Investment Research
But for some perspective, shares are up just 28% since the 2018 merger compared to the S&P 500 which is up 60% during that time.
Nutrien is cheap, with a forward P/E of just 14. Its fertilizer competitors are trading with even lower P/Es, however. Mosaic ( MOS Quick Quote MOS - Free Report) has a forward P/E of 8.2 and CF Industries ( CF Quick Quote CF - Free Report) is trading at 13x. Nutrien is also shareholder friendly, paying an industry leading dividend yielding 2.6%. Mosaic's dividend yields just 0.7% and CF Industries' 2%. Nutrien will report third quarter results on Nov 1. For investors looking for a way to play the agriculture bull market, Nutrien is one to keep on the short list.