Zacks Industry Outlook Highlights: Nutrien,
CF Industries,
The Mosaic Company and Intrepid Potash
Zacks Equity
Research
Zacks Equity Research
Wed, November 24, 2021, 4:07 AM·9 min read
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For Immediate Release
Chicago, IL – November 24, 2021 – Today, Zacks Equity Research
discusses Fertilizer, including Nutrien Ltd. NTR, CF Industries
Holdings, Inc. CF, The Mosaic Company MOS and Intrepid Potash, Inc.
IPI.
The Zacks Fertilizers industry is on a
solid footing buoyed by strong global demand and prices of crop
nutrients. The underlying strength of the agricultural market, a rally
in crop commodity prices and attractive farm economics are spurring
demand for fertilizers globally.
Industry players like Nutrien, CF
Industries, The Mosaic Company and Intrepid
Potash 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 (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 soil’s natural fertility.
Demand for these nutrients is being supported by the need to grow 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?
Solid Demand and Pricing for
Crop Nutrients: The companies in the fertilizers space
are well placed to benefit from strong global demand and prices of
major crop nutrients. 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.
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 across Europe and Asia are also driving nitrogen
prices.
Agricultural Fundamentals
Remain Strong: While the coronavirus pandemic stung a
vast spectrum of industries, agriculture was left unscathed given the
sustained rise in food demand globally. Moreover, strong global demand
and tightened supply provided a boost to crop commodity prices. 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 on the back of
higher crop prices also suggest a pickup in fertilizer demand.
Healthy Farm Economics: Farm
economics have strengthened in the United States on the back of a
spike in crop commodity prices and government support. The U.S.
Department of Agriculture expects net farm income to increase 19.5%
year over year to $113 billion in 2021, the highest level since 2013.
Solid farm income backed by higher agricultural commodity prices will
likely drive farmers’ spending on crop nutrients.
Zacks Industry Rank Reflects
Bright Prospects
The Zacks Fertilizers industry is part of
the broader Zacks Basic Materials sector. It carries a Zacks Industry
Rank #6, which places it in the top 2% 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 upbeat near-term prospects. 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 45.7% over this
period compared with the S&P 500’s rise of 32.5% and the broader
sector’s increase of 13.7%.
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 9.87X compared with the S&P 500’s 15.83X and the sector’s
5.87X.
In the past five years, the industry has
traded as high as 21.97X and as low as 6.04X, with a median of 12.52X.
4 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 solid demand and higher prices for crop nutrients
on the back of strength in the global agriculture markets. Nutrien 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, including Tec Agro. These
factors have contributed to its share price appreciation of 44.6% over
a year.
Nutrien currently sports a Zacks Rank #1
(Strong Buy). It has an expected earnings growth rate of 212.2% for
the current year. The Zacks Consensus Estimate for current-year
earnings of NTR has moved up 12.9% in the past 60 days. You can see the
complete list of today’s Zacks #1 Rank stocks here.
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. The company is gaining from higher
nitrogen fertilizer demand in major markets. CF Industries is seeing
higher nitrogen demand in North America for industrial uses.
Higher nitrogen prices aided by strong
global demand and lower global supply availability are also driving
the company’s top line. CF Industries also remains committed to
boosting shareholders’ value by leveraging strong cash flows. These
factors have resulted in a share price rally of 68.2% over the past
year.
CF Industries, carrying a Zacks Rank #1,
has an expected earnings growth rate of 121.1% for the current year.
CF has a trailing four-quarter earnings surprise of roughly 97.8%, on
average.
Intrepid Potash: Colorado-based
Intrepid Potash is the only producer of muriate of potash in the
United States and also makes a specialty fertilizer, Trio. The company
is gaining from strong commodity prices and higher potash demand and
pricing, which is supporting its sales and margins.
Higher realized sales prices for potash
and Trio are driving Intrepid Potash’s bottom line. A recovery in
economic activities and the strength in commodity prices are driving
demand for Trio. These factors have resulted in a share price rally of
199.4% over the past year.
Intrepid Potash, carrying a Zacks Rank
#1, has an expected earnings growth rate of 244.7% for the current
year. The Zacks Consensus Estimate for earnings for the current year
for IPI has been revised 3.3% upward over the past 60 days.
Mosaic: Florida-based
Mosaic is a leading producer and marketer of concentrated phosphate
and potash for the global agriculture industry. The company is
leveraging increasing global demand for fertilizers and higher
realized prices in its businesses.
Mosaic is also taking measures to cut
costs in a still-challenging operating environment. Its actions to
improve the operating cost structure through transformation plans are
contributing to profitability. Transformational savings are also
driving margins in its Mosaic Fertilizantes segment. Driven by these
factors, the company’s shares have shot up 57.1% over a year.
Mosaic, carrying a Zacks Rank #2 (Buy),
has an expected earnings growth rate of 500% for the current year. The
Zacks Consensus Estimate for current-year earnings for MOS has moved
up 1.4% in the past 60 days.
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