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Canadian-based Nutrien (NTR - Free Report) is a Zacks Rank #5 (Strong Sell) that is a leading provider of crop inputs and services – particularly fertilizer. It supplies growers through its leading global retail network and operates over 2,000 retail locations across the United States, Canada, Australia, and South America.
Following the Russian invasion of Ukraine in February 2022, shares soared by more than 40% in just two months time.
Image Source: Zacks Investment Research
While the stock was already performing well amid an inflationary macroeconomic backdrop, the invasion acted as a unique windfall for the company. Because Ukraine and Russia are two of the world’s largest grain producers (accounting for around a third of the world’s production), farmers elsewhere needed to fill the void – driving up fertilizer prices. Since then, the stock has careened lower and presently the stock still looks like it may have further to go.
Nutrien Company Profile
Nutrien was created when PotashCorp and Agrium merged in early 2018. The merger took place amid a backdrop of bargain basement fertilizer prices. The two companies believed that the now massive $34 billion company could achieve greater scale and offset lower margins by merging. Thus far, the strategy has worked. Nutrien produces and sells potash, phosphate, and nitrogen products, and its competitors include firms such as Mosaic (MOS - Free Report) and CF Industries (CF - Free Report) .
Stocks are Forward Looking
Nutrien earnings have grown like a weed in the past several quarters. In four of the past five quarters, earnings grew at a triple-digit pace. Though past earnings growth is one factor to consider, what really matters is how earnings compare to expectations (surprise), future earnings expectations (consensus estimates), and the delta in recent estimates (consensus estimate trend).
1. Robust, but Slowing EPS Growth:In two of the past three quarters, Nutrien has registered negative EPS surprises. Last quarter, NTR fell short of estimates by 35.95%.
Image Source: Zacks Investment Research
2. Lukewarm Future Expectations: When Nutrien reports earnings on February 15, consensus analyst estimates suggest a slowdown of ~17% versus the corresponding period one year ago. Analysts also anticipate a 16% drop in earnings for the full year 2023. ($11.60 est. vs $13.76 in 2022). According to consensus data, earnings are expected to decline until 2025.
Image Source: Zacks Investment Research
3. Declining Consensus Estimate Trend: Not only are future estimates weak for NTR, but they have also recently been revised lower. For example, 90 days ago the consensus was that NTR would earn $13.42 a share in full-year 2023. Over the past few months that number has steadily dropped and is sitting at $11.60 per share currently.
Image Source: Zacks Investment Research
A Disconnect Between Input Costs and the Stock Price
One of Nutrien’s largest input costs is natural gas, which is used to produce nitrogen. Since August, natural gas prices have been steadily declining. However, Nutrien shares have fallen in tandem after its euphoric top early last year. The United States Natural Gas ETF (UNG) is at its second-most oversold level in more than a year.
Image Source: Zacks Investment Research
If natural gas is to bounce, it will act as another headwind for NTR shares.
Technical View
Over the past three months, relative price weakness is becoming evident in NTR. The Zacks fertilizer group is up 11.80% while Nutrien shares are only up 5.20%.
Image Source: Zacks Investment Research
The 200-day is also acting as resistance into earnings, and a ton of overhead supply exists from the correction the stock has gone through over the last year.
Outlook
With the recent strength in the market, it is tough to find weak stocks. However, Nutrien fits the bill and is underperforming the market and its peers. Though the company is still reporting strong results from a fundamental perspective, what matters to investors and the price of the stock most is the future – and the poor action in the stock illustrates this most. Nutrien faces tough EPS comps (versus last year when the Ukraine war was starting), declining consensus estimates, and a potential headwind if natural gas prices can sustain a bounce. Shorting before earnings and amid a bull market can be tricky and risky. Investors should steer clear for now and monitor how NTR’s EPS results impact the stock.
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Bear of the Day: Nutrien Limited (NTR)
Canadian-based Nutrien (NTR - Free Report) is a Zacks Rank #5 (Strong Sell) that is a leading provider of crop inputs and services – particularly fertilizer. It supplies growers through its leading global retail network and operates over 2,000 retail locations across the United States, Canada, Australia, and South America.
Following the Russian invasion of Ukraine in February 2022, shares soared by more than 40% in just two months time.
Image Source: Zacks Investment Research
While the stock was already performing well amid an inflationary macroeconomic backdrop, the invasion acted as a unique windfall for the company. Because Ukraine and Russia are two of the world’s largest grain producers (accounting for around a third of the world’s production), farmers elsewhere needed to fill the void – driving up fertilizer prices. Since then, the stock has careened lower and presently the stock still looks like it may have further to go.
Nutrien Company Profile
Nutrien was created when PotashCorp and Agrium merged in early 2018. The merger took place amid a backdrop of bargain basement fertilizer prices. The two companies believed that the now massive $34 billion company could achieve greater scale and offset lower margins by merging. Thus far, the strategy has worked. Nutrien produces and sells potash, phosphate, and nitrogen products, and its competitors include firms such as Mosaic (MOS - Free Report) and CF Industries (CF - Free Report) .
Stocks are Forward Looking
Nutrien earnings have grown like a weed in the past several quarters. In four of the past five quarters, earnings grew at a triple-digit pace. Though past earnings growth is one factor to consider, what really matters is how earnings compare to expectations (surprise), future earnings expectations (consensus estimates), and the delta in recent estimates (consensus estimate trend).
1. Robust, but Slowing EPS Growth:In two of the past three quarters, Nutrien has registered negative EPS surprises. Last quarter, NTR fell short of estimates by 35.95%.
Image Source: Zacks Investment Research
2. Lukewarm Future Expectations: When Nutrien reports earnings on February 15, consensus analyst estimates suggest a slowdown of ~17% versus the corresponding period one year ago. Analysts also anticipate a 16% drop in earnings for the full year 2023. ($11.60 est. vs $13.76 in 2022). According to consensus data, earnings are expected to decline until 2025.
Image Source: Zacks Investment Research
3. Declining Consensus Estimate Trend: Not only are future estimates weak for NTR, but they have also recently been revised lower. For example, 90 days ago the consensus was that NTR would earn $13.42 a share in full-year 2023. Over the past few months that number has steadily dropped and is sitting at $11.60 per share currently.
Image Source: Zacks Investment Research
A Disconnect Between Input Costs and the Stock Price
One of Nutrien’s largest input costs is natural gas, which is used to produce nitrogen. Since August, natural gas prices have been steadily declining. However, Nutrien shares have fallen in tandem after its euphoric top early last year. The United States Natural Gas ETF (UNG) is at its second-most oversold level in more than a year.
Image Source: Zacks Investment Research
If natural gas is to bounce, it will act as another headwind for NTR shares.
Technical View
Over the past three months, relative price weakness is becoming evident in NTR. The Zacks fertilizer group is up 11.80% while Nutrien shares are only up 5.20%.
Image Source: Zacks Investment Research
The 200-day is also acting as resistance into earnings, and a ton of overhead supply exists from the correction the stock has gone through over the last year.
Outlook
With the recent strength in the market, it is tough to find weak stocks. However, Nutrien fits the bill and is underperforming the market and its peers. Though the company is still reporting strong results from a fundamental perspective, what matters to investors and the price of the stock most is the future – and the poor action in the stock illustrates this most. Nutrien faces tough EPS comps (versus last year when the Ukraine war was starting), declining consensus estimates, and a potential headwind if natural gas prices can sustain a bounce. Shorting before earnings and amid a bull market can be tricky and risky. Investors should steer clear for now and monitor how NTR’s EPS results impact the stock.