Nutrien’s NTR profits fell in 2023 and 2024 largely due to falling fertilizer prices, but we see a rebound in 2025.
Why it matters: Because Nutrien is the largest fertilizer producer in the world by capacity, its share price and underlying business results, including revenue, profits, and free cash flow, are sensitive to fertilizer prices.
· Potash, Nutrien’s largest businesses, is among the most volatile commodities. Prices are sensitive to the supply/demand balance and have fallen over 70% from all-time highs in 2022. Additional volatility comes from weather and crop price movements, both of which affect fertilizer demand.
Key Morningstar Metrics for Nutrien
· Fair Value Estimate: C$99
· Morningstar Rating: ★★★★
· Morningstar Economic Moat Rating: Narrow
· Morningstar Uncertainty Rating: High
The bottom line: Narrow-moat Nutrien is undervalued, in our view. The shares trade in 4-star territory, at more than 25% below our CAD 99/USD 70 fair value estimate. For income-focused investors, Nutrien also has a dividend yield above 4% supported by a strong balance sheet and free cash flow exceeding dividends.
Coming up: We see two catalysts for the stock in 2025. First, rising potash prices should lead to double-digit profit growth in the potash business. Nutrien is one of the lowest-cost potash producers globally, which underpins our narrow moat rating. Rising prices should drive strong profit growth.
· Potash prices will rise in 2025 due to supply cuts from Belarus and Russia, which combine to generate 40% of global potash exports each year. As we forecast demand to reach an all-time high in 2025, supply cuts should tighten the market and lead to higher prices.
· The second catalyst is rising retail profits. Management implemented an overhead cost-reduction plan in the retail business to drive higher profits. This included shutting down some locations and increasing the number of proprietary products, both of which should boost profitability.
Nutrien Stock: Price vs. Morningstar Fair Value Estimate
Source: Morningstar Direct. Latest price as of 04:00 PM EST. Data as of March 03, 2025.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
