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Bear of the Day: Nutrien (NTR)

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Nutrien Ltd. (NTR - Free Report) had to cut its full year guidance this spring even though there was strong spring demand for all crop inputs and services. 

This Zacks Rank #5 (Strong Sell) is expected to see a double digit earnings decline this year even though it's an essential business during COVID-19.

Nutrien is a Canadian-based provider of crop inputs and services. It distributes 25 million tonnes of potash, nitrogen and phosphate products world-wide. The company also runs an extensive agriculture retail network.

Another Earnings Miss in Q1

On May 6, Nutrien reported its first quarter results and missed for the fifth quarter in a row. Earnings were a loss of $0.12 versus the Zacks Consensus of a loss of $0.04.

One of the positives in the quarter was on-line sales which surpassed $170 million in the US in the quarter, up from just $3 million over the same period a year ago as its digital platform took off.

The company claims it's the only national and full-service agriculture ecommerce platform in North America.

It accounted for 40% of Nutrien's US sales of products that are currently available for purchase online.

Nutrien remained bullish in May as spring weather was cooperating for planting.

"The first quarter is typically a weaker earnings period for us, but we are seeing strong spring demand for all crop inputs and services, as North American farmers catch up after the extreme wet weather that impacted agricultural activities last year," said Chuck Magro, Nutrien’s President and CEO.

"COVID-19 has had limited direct impact on our operations or crop input demand, and Nutrien remains in an excellent financial position with a strong balance sheet and free cash flow, a stable dividend and ample liquidity," he added.

Outlook for Fertilizers

As of May, some of the fertilizer prices were under pressure, including potash prices.

Nitrogen prices, however, were relatively stable in 2020 and Nutrien expected that to continue.

North American phosphate prices were firm in the spring due to strong demand, but they remained well below previous year levels. Chinese DAP/MAP exports were down 10% year-over-year in the first quarter.

Lowered Full Year EPS Guidance

As a result of the price pressures and uncertainties surrounding COVID-19, even as farming remains an essential business, Nutrien lowered its earnings guidance to the range of $1.50 to $2.10 from $.190 to $2.60.

The analysts followed by cutting their full year estimates with 7 cutting in the last 2 months.

The 2020 Zacks Consensus fell to $1.63 from $2.09 over that time.

One analyst has gotten more bearish in the last week, with another estimate cut.

Shares Still Lagging the Market

Nutrien sold off in the coronavirus sell-off in March 2020 and then recovered.

Over the last 3 months it's down just 5.2%.

But shares are still down 32.9% year-to-date.

But the fertilizer industry, overall, has been in a world of pain the last 5 years.

During that time, fertilizer stocks were down 35.7% compared to the iShares (IVV) up 62.6%.

Nutrien pays a dividend for your patience. It paid $0.45 in the first quarter and is yielding 5.6%.

But it's difficult for all the fertilizer companies right now.

Fertilizers Mosaic (MOS - Free Report) is a Zacks Rank #4 (Sell) while CF Industries (CF - Free Report) is a Zacks Rank #3 (Hold).

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