Here's Why You Should Retain Nutrien Stock in Your Portfolio

Nutrien Ltd. NTR is benefiting from healthy demand for crop nutrients, its actions to reduce costs and strategic acquisitions amid headwinds from lower fertilizer prices.

NTR's shares are down 22.1% over a year compared with a 20.1% decline recorded by its industry.

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Let's find out why this Zacks Rank #3 (Hold) stock is worth retaining at the moment.

Nutrien Gains on Healthy Demand, Acquisitions & Cost Cuts

Nutrien is well-positioned to benefit from higher demand for fertilizers, backed by the strength in global agriculture markets. It is seeing healthy fertilizer demand in its major markets. Strong demand in key offshore markets and low channel inventories in North America at the start of 2024 drove record potash sales volume in the first half. NTR's phosphate sales volumes were also higher than first-half 2023 levels due to strong demand for fertilizer, industrial and feed products. First-half 2024 nitrogen sales volumes remained stable compared with the same period in 2023.

Strong grower economics, improved affordability and low inventory levels are expected to drive potash demand globally. The phosphate market is also benefiting from higher global demand and low producer and channel inventories. Demand for nitrogen fertilizer also remains healthy in major markets. Global nitrogen requirement is being driven by demand in North America, India and Brazil.

The company should also gain from acquisitions and increased adoption of its digital platform. It continues to expand its footprint in Brazil through acquisitions. NTR completed several acquisitions in 2023 and is expected to continue pursuing targeted opportunities in its core markets this year.

Cost and operational efficiency initiatives are also expected to aid the company's performance. NTR remains focused on lowering the cost of production in the potash business. The company has announced a number of strategic actions to reduce its controllable costs and boost free cash flow. Lower natural gas costs and reduced ammonia and sulfur input costs are also contributing to a decline in its cost of goods sold.

Soft Fertilizer Prices Weigh on NTR's Margins

Softer fertilizer prices are expected to hurt the company's performance. Prices of phosphate and potash have retreated since the back half of 2022 from their peak levels attained in the first half riding on the impacts of the Russia-Ukraine war and disruptions due to the sanctions in Belarus.

Global nitrogen prices have declined since the beginning of 2023. Higher global supply availability driven by higher global operating rates due to lower global energy costs has resulted in a decline in prices. Lower fertilizer selling prices negatively impacted NTR's financial results in the second quarter. Lower prices are expected to hurt the company's sales and profitability in the near term.

Stocks to Consider

Better-ranked stocks in the Basic Materials space are Newmont Corporation, Element Solutions Inc and Eldorado Gold Corporation, each sporting a Zacks Rank #1 (Strong Buy).

The Zacks Consensus Estimate for Newmont's current-year earnings is pegged at $2.82, indicating a rise of 75.2% from year-ago levels. The Zacks Consensus Estimate for NEM's earnings has increased 16% in the past 60 days. The stock has rallied around 34% in the past year.

The consensus estimate for Element Solutions' current-year earnings has increased by 0.7% in the past 60 days. ESI beat the consensus estimate in three of the last four quarters while delivering in-line results on the other occasion. In this timeframe, it delivered an earnings surprise of around 3.8%, on average.

The Zacks Consensus Estimate for Eldorado Gold's current year earnings is pegged at $1.35 per share, indicating a year-over-year rise of 136.8%. EGO beat the consensus estimate in each of the last four quarters, with the average earnings surprise being 430.3%. The company's shares have rallied roughly 93% in the past year.

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