Nutrien struggles with low fertilizer prices

Nutrien Corp.’s (TSX:NTR) shares are down by more than half from their peak of $141 in the spring of 2022. They touched a new low in August.

The shares surged two years ago after sanctions were imposed on Russia in response to its invasion of Ukraine.  Potash prices have eased since and shipments have resumed from Russia and Belarus. The combination sent their share price lower.

Here’s an update:

Background: Nutrien is the world’s largest producer of agricultural fertilizers including nitrogen and phosphates which it sells in bulk. It has roughly a 20% share of global potash sales. It is the largest US retailer of agricultural products and has a network of more than 2,000 stores worldwide where it sells fertilizers, crop chemicals, seeds and other services to farmers.

Performance: The shares are down 13.4% year-to-date. Nutrien’s second-quarter results showed revenue down 13%, year-over-year and margins contracting.  

The company is certainly struggling, but the pendulum may have swung too far. Morningstar Research Analyst Seth Goldstein said in a recent research note the company’s shares are materially undervalued with a fair price of $96 a share – a third higher than the current price. He sees potash prices rebounding and the shares with it. In the meantime, investors benefit from the high yielding dividend.

 Dividend:  Despite the weakness, Nutrien raised its dividend by 1.3% with the July payment. It has increased its dividend in each of the last six years. The to $2.96 annual rate yields a high 4.5% at current prices. 

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