Editor’s Note: This analysis was originally published as a stock note by Morningstar Equity Research.
Nutrien NTR reported sequentially improving first-quarter potash results versus the fourth quarter of 2024, as higher prices drove profit growth. Yet shares were down 4% at the time of writing, as the market reacted to weaker first-quarter results putting consensus estimates in question.
Why it matters: As a commodity fertilizer producer, Nutrien’s profits are subject to fertilizer price movements, which are volatile, based on the balance between supply and demand. Potash prices were at cyclical lows in 2024, so higher prices support improved profits.
Nutrien’s first-quarter results in the ag retail business saw profits decline due to poor weather that delayed farmer planting. We think nearly all of the lost sales will be made up in the second quarter.Management does not provide annual guidance for its companywide results. We think this can make the stock more volatile in the short term, as it likely creates a wider range of consensus estimates to start the year.
The bottom line: Our fair value estimate falls to C$96 per share from C$99 due to currency movements since our last update. We view Nutrien shares as undervalued, with the stock trading more than 20% below our fair value estimate.
In potash, we see price rising to at least in line with our long-term forecast. Growing global demand with flat supply should move the market from undersupplied back into balance, supporting higher prices.We see little direct impact from tariffs on Nutrien. Nutrien’s Canadian-produced potash and nitrogen are currently exempt from US tariffs. While Nutrien’s nitrogen produced in Trinidad is subject to a 10% import tariff, the cost should be passed along in the form of price increases.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar’s editorial policies.
