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3 Fertilizer Stocks to Keep an Eye on in a Challenging Industry
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The Zacks Fertilizers industry is challenged by elevated costs of key raw materials, partly due to the Russia-Ukraine war, which has put pressure on the margins of companies in this space. Weaker crop prices and higher costs are also likely to result in farmers reducing application rates, partly due to affordability issues, leading to weaker fertilizer demand.
However, improved fertilizer prices augur well for the industry players. Fertilizer players such as Nutrien Ltd. (NTR - Free Report) , CF Industries Holdings, Inc. (CF - Free Report) and Yara International ASA (YARIY - Free Report) are worth a look, notwithstanding the near-term headwinds.
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 (including diammonium phosphate, monoammonium phosphate and phosphoric acid), potash and nitrogen (including urea, ammonia and urea ammonium nitrate) fertilizers. They also provide other nitrogen products to help farmers maximize crop yield. Crop nutrients are essential to drive agricultural productivity and boost the natural fertility of the soil. Demand for these nutrients is being supported by the need to increase the production of grains to address rising food consumption globally. Moreover, the constant need of growers to nourish their crops, replenish nutrients in the soil following a harvest and boost yields to feed a growing global population drives the consumption of fertilizers.
What's Shaping the Future of the Fertilizers Industry?
Elevated Input Costs a Concern: Increased prices of major raw materials pose a headwind to the companies in this space. Prices of both sulfur and ammonia — key inputs for the production of phosphate — remain elevated. Supply disruptions from Russia amid the war with Ukraine contributed to the rise in prices of both sulfur and ammonia. Plant shutdowns and maintenance also led to a tight supply of these raw materials, which, coupled with strong demand, pushed up their prices. Rising natural gas prices, a key feedstock for nitrogen fertilizer, are also a concern. Higher raw material costs have led to an increase in production costs. As such, fertilizer makers are likely to face short-term margin pressure associated with higher input costs.
Reduced Affordability to Dampen Fertilizer Demand: While farm income is projected to rise this year, growers face challenges from increased fertilizer prices, higher input and other costs and lower crop commodity prices. Escalating costs are likely to result in farmers reducing fertilizer applications or switching to less fertilizer-intensive crops, leading to softer demand. Per the U.S. Department of Agriculture (“USDA”), net farm income is projected to climb 40.7% year over year to $179.8 billion this year, driven by a significant increase in government payments. However, this reflects a decline from USDA’s February 2025 projection of $180.1 billion. Also, farmers face challenges from lower expected crop receipts in 2025. USDA sees crop cash receipts to decline 2.5% year over year in 2025 due to lower prices for most crops. Prices of corn, soybean and wheat have declined from the multi-year highs reached in 2022, and remain lower this year due to oversupply.
Higher Fertilizer Prices Augur Well: Prices of phosphate and potash retreated in the back half of 2022 from their peak levels attained in the first half, impacted by the Russia-Ukraine war and disruptions due to the sanctions in Belarus. Global nitrogen prices also declined due to higher global supply, driven by increased global operating rates resulting from lower global energy costs. Prices remain depressed in 2023 and 2024, weighing on the profitability of fertilizer companies. On a positive note, strong demand and supply tightness have led to an uptick in fertilizer prices this year, with phosphate prices seeing a notable increase. Higher fertilizer prices are expected to drive top-line and margin expansion for companies in this space over the near term.
Zacks Industry Rank Reflects Downbeat Prospects
The Zacks Fertilizers industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #207, which places it in the bottom 15% 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 bleak near term. Our research shows that the top 50% of the Zacks-ranked industries outperform 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 Underperforms S&P 500
The Zacks Fertilizers industry has underperformed the Zacks S&P 500 composite while outperforming the broader Zacks Basic Materials sector over the past year.
The industry has gained 13.5% over this period against the S&P 500’s rise of 22.7% and the broader sector’s increase of 8%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the 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 5.55X compared with the S&P 500’s 19.18X and the sector’s 13.91X.
In the past five years, the industry has traded as high as 18.05X and as low as 4.55X, with a median of 10.4X, as the chart below shows.
Enterprise Value/EBITDA (EV/EBITDA) Ratio
Enterprise Value/EBITDA (EV/EBITDA) Ratio
3 Fertilizer Stocks to Keep a Close Eye on
Nutrien: Canada-based Nutrien is a leading provider of crop inputs and services. The company is benefiting from higher demand for crop nutrients, backed by supportive global agriculture markets. It is seeing strong demand in its major markets, particularly North America. NTR is also gaining from acquisitions, cost efficiency and increased adoption of its digital platform. The company also continues to expand its footprint in Brazil through acquisitions. 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.
Nutrien currently carries a Zacks Rank #3 (Hold). NTR has expected earnings growth of 31.4% for 2025. The Zacks Consensus Estimate for 2025 earnings has been revised 5.1% upward over the past 60 days. It also has an expected long-term earnings per share growth rate of 14.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: NTR
CF Industries: Illinois-based CF Industries is a leading global manufacturer of nitrogen and hydrogen products for fertilizer, clean energy, emissions reduction and other industrial applications. It is gaining from higher nitrogen fertilizer demand in the major markets such as North America, Brazil and India. CF is seeing higher nitrogen demand for industrial uses in North America. CF remains committed to boosting shareholders’ value by leveraging strong cash flows. The company is also taking action to de-leverage its balance sheet.
CF Industries, currently with a Zacks Rank #3, has an expected earnings growth rate of 23.7% for 2025. CF’s earnings beat the Zacks Consensus Estimate in each of the last four quarters at an average of 25.3%.
Price and Consensus: CF
Yara International: Norway-based Yara International is a leading global producer and supplier of mineral fertilizers. It has industry-leading experience in ammonia development, production, operations and distribution. A favorable nitrogen demand environment bodes well for YARIY. Cost reductions and actions to strengthen the balance sheet are expected to boost the company’s profitability and cash flows. YARIY also remains focused on rewarding its shareholders by leveraging strong cash flows.
Yara International presently has a Zacks Rank #3. It has an expected earnings growth rate of 149.3% for 2025. YARIY has a trailing four-quarter earnings surprise of roughly 58.4%, on average.
Price and Consensus: YARIY
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3 Fertilizer Stocks to Keep an Eye on in a Challenging Industry
The Zacks Fertilizers industry is challenged by elevated costs of key raw materials, partly due to the Russia-Ukraine war, which has put pressure on the margins of companies in this space. Weaker crop prices and higher costs are also likely to result in farmers reducing application rates, partly due to affordability issues, leading to weaker fertilizer demand.
However, improved fertilizer prices augur well for the industry players. Fertilizer players such as Nutrien Ltd. (NTR - Free Report) , CF Industries Holdings, Inc. (CF - Free Report) and Yara International ASA (YARIY - Free Report) are worth a look, notwithstanding the near-term headwinds.
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 (including diammonium phosphate, monoammonium phosphate and phosphoric acid), potash and nitrogen (including urea, ammonia and urea ammonium nitrate) fertilizers. They also provide other nitrogen products to help farmers maximize crop yield. Crop nutrients are essential to drive agricultural productivity and boost the natural fertility of the soil. Demand for these nutrients is being supported by the need to increase the production of grains to address rising food consumption globally. Moreover, the constant need of growers to nourish their crops, replenish nutrients in the soil following a harvest and boost yields to feed a growing global population drives the consumption of fertilizers.
What's Shaping the Future of the Fertilizers Industry?
Elevated Input Costs a Concern: Increased prices of major raw materials pose a headwind to the companies in this space. Prices of both sulfur and ammonia — key inputs for the production of phosphate — remain elevated. Supply disruptions from Russia amid the war with Ukraine contributed to the rise in prices of both sulfur and ammonia. Plant shutdowns and maintenance also led to a tight supply of these raw materials, which, coupled with strong demand, pushed up their prices. Rising natural gas prices, a key feedstock for nitrogen fertilizer, are also a concern. Higher raw material costs have led to an increase in production costs. As such, fertilizer makers are likely to face short-term margin pressure associated with higher input costs.
Reduced Affordability to Dampen Fertilizer Demand: While farm income is projected to rise this year, growers face challenges from increased fertilizer prices, higher input and other costs and lower crop commodity prices. Escalating costs are likely to result in farmers reducing fertilizer applications or switching to less fertilizer-intensive crops, leading to softer demand. Per the U.S. Department of Agriculture (“USDA”), net farm income is projected to climb 40.7% year over year to $179.8 billion this year, driven by a significant increase in government payments. However, this reflects a decline from USDA’s February 2025 projection of $180.1 billion. Also, farmers face challenges from lower expected crop receipts in 2025. USDA sees crop cash receipts to decline 2.5% year over year in 2025 due to lower prices for most crops. Prices of corn, soybean and wheat have declined from the multi-year highs reached in 2022, and remain lower this year due to oversupply.
Higher Fertilizer Prices Augur Well: Prices of phosphate and potash retreated in the back half of 2022 from their peak levels attained in the first half, impacted by the Russia-Ukraine war and disruptions due to the sanctions in Belarus. Global nitrogen prices also declined due to higher global supply, driven by increased global operating rates resulting from lower global energy costs. Prices remain depressed in 2023 and 2024, weighing on the profitability of fertilizer companies. On a positive note, strong demand and supply tightness have led to an uptick in fertilizer prices this year, with phosphate prices seeing a notable increase. Higher fertilizer prices are expected to drive top-line and margin expansion for companies in this space over the near term.
Zacks Industry Rank Reflects Downbeat Prospects
The Zacks Fertilizers industry is part of the broader Zacks Basic Materials sector. It carries a Zacks Industry Rank #207, which places it in the bottom 15% 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 bleak near term. Our research shows that the top 50% of the Zacks-ranked industries outperform 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 Underperforms S&P 500
The Zacks Fertilizers industry has underperformed the Zacks S&P 500 composite while outperforming the broader Zacks Basic Materials sector over the past year.
The industry has gained 13.5% over this period against the S&P 500’s rise of 22.7% and the broader sector’s increase of 8%.
One-Year Price Performance
Industry's Current Valuation
On the basis of the 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 5.55X compared with the S&P 500’s 19.18X and the sector’s 13.91X.
In the past five years, the industry has traded as high as 18.05X and as low as 4.55X, with a median of 10.4X, as the chart below shows.
Enterprise Value/EBITDA (EV/EBITDA) Ratio
Enterprise Value/EBITDA (EV/EBITDA) Ratio
3 Fertilizer Stocks to Keep a Close Eye on
Nutrien: Canada-based Nutrien is a leading provider of crop inputs and services. The company is benefiting from higher demand for crop nutrients, backed by supportive global agriculture markets. It is seeing strong demand in its major markets, particularly North America. NTR is also gaining from acquisitions, cost efficiency and increased adoption of its digital platform. The company also continues to expand its footprint in Brazil through acquisitions. 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.
Nutrien currently carries a Zacks Rank #3 (Hold). NTR has expected earnings growth of 31.4% for 2025. The Zacks Consensus Estimate for 2025 earnings has been revised 5.1% upward over the past 60 days. It also has an expected long-term earnings per share growth rate of 14.5%. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.
Price and Consensus: NTR
CF Industries: Illinois-based CF Industries is a leading global manufacturer of nitrogen and hydrogen products for fertilizer, clean energy, emissions reduction and other industrial applications. It is gaining from higher nitrogen fertilizer demand in the major markets such as North America, Brazil and India. CF is seeing higher nitrogen demand for industrial uses in North America. CF remains committed to boosting shareholders’ value by leveraging strong cash flows. The company is also taking action to de-leverage its balance sheet.
CF Industries, currently with a Zacks Rank #3, has an expected earnings growth rate of 23.7% for 2025. CF’s earnings beat the Zacks Consensus Estimate in each of the last four quarters at an average of 25.3%.
Price and Consensus: CF
Yara International: Norway-based Yara International is a leading global producer and supplier of mineral fertilizers. It has industry-leading experience in ammonia development, production, operations and distribution. A favorable nitrogen demand environment bodes well for YARIY. Cost reductions and actions to strengthen the balance sheet are expected to boost the company’s profitability and cash flows. YARIY also remains focused on rewarding its shareholders by leveraging strong cash flows.
Yara International presently has a Zacks Rank #3. It has an expected earnings growth rate of 149.3% for 2025. YARIY has a trailing four-quarter earnings surprise of roughly 58.4%, on average.
Price and Consensus: YARIY