Apart from deepening supply chain disruptions and higher oil and natural gas prices, Russia’s invasion of Ukraine has driven fertilizer prices to record highs. According to British commodity consultancy CRU, prices of critical raw materials such as nitrates, nitrogen, ammonia, potash, and sulfates that make up the fertilizer market have now exceeded the highs seen during the food and energy crisis of 2008.
With talks between Ukraine and Russia yet to bear fruit, acute supply disruptions will likely keep increasing fertilizer prices. As the rising demand for fertilizers should help companies in this space to pass the soaring input costs to customers, the industry should thrive.
This is why today I’m going to analyze three prominent fertilizer stocks: Nutrien Ltd. (NTR), CF Industries Holdings, Inc. (CF), and Corteva, Inc. (CTVA). These stocks look well-positioned to capitalize on the rising fertilizer prices.
Russia-Ukraine War: A Boon For the Fertilizer Industry
Fertilizers are indispensable for farmers as they help improve the growth and productiveness of plants by supplying essential nutrients. They enhance the natural fertility of the soil.
Russia’s invasion of Ukraine has led to supply disruptions of oil, natural gas, grains, fertilizers, and other essential commodities, prompting their prices to skyrocket. Fertilizer prices have hit all-time highs, prompting fears of a global food shortage.
Russia and Ukraine are amongst the biggest producers of agricultural commodities globally. According to the U.N. Food and Agriculture Organization, Russia was the world’s top exporter of nitrogen fertilizers and the second-largest potassium and phosphorus fertilizers supplier. According to Morgan Stanley, Russia and Ukraine export 28% of the fertilizers made from nitrogen, phosphorus, and potassium. Russia exports 11% and 48% of the world’s urea and ammonium nitrate, respectively, while Russia and Belarus combine to ship 40% of the world’s potash.
Russia’s war with Ukraine has driven up the prices of natural gas, which is a crucial ingredient of fertilizer manufacturing, and has disrupted shipping which has caused a strain on the world’s fertilizer supply chain. The country had also asked its fertilizer producers to suspend fertilizer exports temporarily. Moreover, Russia has been hit by strict sanctions, curtailing exports and affecting its finances. Since it invaded Ukraine, the Green Markets North America fertilizer – price index has risen by 42%.
With the talks between Ukraine and Russia showing no signs of stopping the war in the near term, the supply of crucial fertilizers could remain tight, thus enabling fertilizer and other crop input companies to take advantage of the rising prices.
3 Fertilizer Stocks to Buy Now
Nutrien Ltd. (NTR)
Headquartered in Saskatoon, Canada, NTR is the largest crop inputs, services, and solutions provider. It offers potash, nitrogen, phosphate, sulfate products, and financial solutions. Also, it distributes crop nutrients, crop protection products, seeds, and merchandise products through 2,000 retail locations in the U.S., Canada, Australia, and South America.
Analysts expect NTR’s EPS for the quarter ending June 30, 2022, to increase 139.4% year-over-year to $4.98. Its revenue for fiscal 2022 is expected to increase 34.4% year-over-year to $36.09 billion. Its EPS is expected to grow 33% per annum over the next five years. Over the past year, the stock has gained 93.8% to close the last trading session at $106.02.
In terms of trailing-12-month gross profit margin and net income margin, NTR’s 35.03% and 11.74% are 14.4% and 33.7% higher than the industry averages of 30.60% and 8.78%, respectively. Also, its trailing-12-month EBITDA margin and levered FCF margin of 24.16% and 6.55% are higher than the industry averages of 21.29% and 5.89%, respectively.
NTR’s POWR Ratings reflect solid prospects. The company has an overall rating of A, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
It has an A grade for Growth and a B grade for Sentiment and Quality. It is ranked #2 out of 31 stocks in the Agriculture industry. Click here to see the other ratings of NTR for Value, Momentum, and Stability.
CF Industries Holdings, Inc. (CF)
CF manufactures and sells hydrogen and nitrogen products for energy, fertilizer, emissions reduction, and other industrial activities worldwide. Its main products include anhydrous ammonia, granular urea, urea ammonium nitrate, and ammonium nitrate products. The company also offers diesel exhaust fluid, urea liquor, nitric acid, aqua ammonia products, and compound fertilizer products with nitrogen, phosphorus, and potassium.
For the quarter ending March 31, 2022, CF’s EPS and revenue are expected to increase 512.9% and 142.4% year-over-year to $4.29 and $2.54 billion, respectively. Its EPS is expected to grow 62.7% per annum over the next five years. Over the past year, the stock has gained 137.7% to close the last trading session at $108.21.
In terms of trailing-12-month gross profit margin and net income margin, CF’s 36.51% and 14.03% are 19.3% and 59.7% higher than the industry averages of 30.60% and 8.78%, respectively. Also, its trailing-12-month EBITDA margin and levered FCF margin of 47.81% and 33.35% are higher than the industry averages of 21.29% and 5.89%, respectively.
CF’s POWR Ratings reflect this promising outlook. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
It has an A grade for Growth and Quality. It is ranked #5 in the same industry. To see the additional ratings of CF for Value, Momentum, Stability, and Sentiment, click here.
Corteva, Inc. (CTVA)
CTVA is a global provider of seed and crop protection solutions focused on the agriculture industry. Its seed segment is engaged in developing and supplying germplasm and traits that produce optimum yields for farms. Its crop protection segment serves the global agricultural input industry with products that protect against weeds, insects, and other pests. Its brand includes CLOSER, DELEGATE, Pioneer, Brevant seeds, etc.
Analysts expect CTVA’s EPS for fiscal 2023 to increase 19.7% year-over-year to $2.92. Its revenue for the quarter ending June 30, 2022, is expected to increase 13.7% year-over-year to $6.06 billion. It surpassed Street EPS estimates in three of the trailing four quarters. Its EPS is expected to grow 22.3% per annum over the next five years. Over the past six months, the stock has gained 39.4% to close the last trading session at $59.64.
In terms of trailing-12-month gross profit margin and net income margin, CTVA’s 41.10% and 11.24% are 34.3% and 27.9% higher than the industry averages of 30.60% and 8.78%, respectively. Also, its trailing-12-month EBITDA margin and levered FCF margin of 24.77% and 21.48% are higher than the industry averages of 21.29% and 5.89%, respectively.
CTVA’s POWR Ratings reflect solid prospects. The stock has an overall rating of B, translating to a Buy in our proprietary rating system.
It has a B grade for Quality. Again, it is ranked #6 in the same industry. Click here to see the additional ratings of CTVA for Growth, Value, Momentum, Stability, and Sentiment.
NTR shares were trading at $106.16 per share on Monday afternoon, up $0.14 (+0.13%). Year-to-date, NTR has gained 41.84%, versus a -6.67% rise in the benchmark S&P 500 index during the same period.
About the Author: Dipanjan Banchur
Since he was in grade school, Dipanjan was interested in the stock market. This led to him obtaining a master’s degree in Finance and Accounting. Currently, as an investment analyst and financial journalist, Dipanjan has a strong interest in reading and analyzing emerging trends in financial markets.
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