Russia’s invasion of Ukraine has prompted several Western countries to impose harsh sanctions on Russia, including import embargoes on major Russian products. This has caused fertilizer prices to skyrocket because Russia is a leading low-cost exporter of most crop nutrients.
Furthermore, as supply chain bottlenecks worsen because of the war, food prices are also rising. The Green Markets North American Fertilizer Index rose 16% on March 11 to hit a record high. Amid the surging fertilizer prices, which could hurt the domestic agriculture industry, the U.S. Department of Agriculture announced a $250 million investment plan to boost the domestic fertilizer industry.
This hefty federal investment and solid demand levels should allow fundamentally-sound fertilizer companies Nutrien Ltd. (NTR), CF Industries Holdings, Inc. (CF), ICL Group Ltd (ICL), and Yara International ASA (YARIY) to grow significantly in the near term.
Nutrien Ltd. (NTR)
Saskatoon, Canada-based NTR is a leading supplier of crop inputs and services. It operates through four segments: Retail, Potash, Nitrogen, and Phosphate. The company renders its services to farmers directly through a network of farm centers in North America, South America, and Australia.
NTR announced plans to increase its potash production capability to approximately 15 million tonnes this year. This marks a one-million-tonne increase in production from its previous target due to the uncertainty in global potash supply from Eastern Europe in the wake of the Russia-Ukraine war. The company is slated to increase its potash production by 20% in 2022 from the 2020 levels, thereby substantially boosting its revenues.
During the fourth quarter, ended Dec. 31, 2021, NTR’s net sales increased 79.5% year-over-year to $7.27 billion. Its net earnings rose 282% from its year-ago value to $1.21 billion. The company’s adjusted EBITDA increased 220.7% year-over-year to $2.46 billion, while its adjusted EPS grew 929% from the prior-year quarter to $2.47.
The $2.66 consensus EPS estimate for its fiscal first quarter (ending March 31, 2022) represents an 816.9% improvement year-over-year. The $7.68 billion consensus revenue estimate for the current quarter represents a 72.6% increase from the same period last year. The company has an impressive earnings surprise history; it surpassed the consensus EPS estimates in three of the trailing four quarters.
Shares of NTR have risen 61.8% in price over the past year to close yesterday’s trading session at $93.82.
NTR’s POWR Ratings reflect solid prospects. The company has an overall A rating, which translates to a Strong Buy in our proprietary rating system. The POWR Ratings assess stocks by 118 distinct factors, each with its own weighting.
It has an A grade for Growth and a B for Sentiment and Quality. It is ranked #3 of 29 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 in Deerfield, Ill., is a leading global manufacturer of hydrogen and nitrogen products used for energy, fertilizer, emissions reduction, and industrial activities. Its core product is anhydrous ammonia, which contains 82% nitrogen and 18% hydrogen. CF mainly supplies cooperatives, wholesalers, independent fertilizer distributors, traders, and industrial users.
CF plans to expand fertilizer shipments to both U.S. coasts to offset the decline in exports from Russia. Given rising fertilizer prices, these increased shipments should significantly boost CF’s revenues and profit margins in the near term.
CF’s net sales increased 131% year-over-year to $2.54 billion in the fourth quarter, ended Dec. 31, 2021. Its operating earnings grew 623.7% from its year-ago value to $1.13 billion, while its net earnings improved 621.8% year-over-year to $859 million. The company’s EPS increased 717.5% from its year-ago value to $3.27.
Analysts expect CF’s revenue for its fiscal year 2022 first quarter (ending March 31, 2022) to come in at $2.55 billion, representing 143.3% year-over-year growth. The $4.07 consensus EPS estimate for the current quarter indicates a 480.8% improvement from the same period last year.
Shares of CF have gained 80.3% in price over the past year to close the last trading session at $88.16.
CF’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which equates to Buy in our proprietary rating system. CF has an A grade for Growth and Quality. The stock is ranked #7 of 29 stocks in the Agriculture industry.
In addition to the grades I have just highlighted, one can view CF’s ratings for Stability, Sentiment, Value, and Momentum here.
ICL Group Ltd (ICL)
Headquartered in Israel, ICL and its subsidiaries are engaged in the fertilizer and specialty chemical sectors. The company operates in three segments: Fertilizers; Industrial Products; and Performance Products, and executes its sales through marketing companies, agents, and distributors.
On February 16, ICL’s Planet Startup Hub invested in vertically integrated agricultural platform Plantible Foods. According to the vice president of the Food Specialties Commercial Business for ICL, Rado Spork a, "Our collaboration with Paintable Foods is a part of our Impacting Better Food strategy, bringing next-generation protein technology to market faster."
ICL’s net sales increased 54.7% year-over-year to $2.04 billion in the fourth quarter, ended Dec. 31, 2021. Its operating income grew 231.7% from its year-ago value to $461 million, while its net income improved 325.7% year-over-year to $298 million over the period. The company’s EPS increased 320% from its year-ago value to $0.21.
The $8.59 billion consensus revenue estimate for its fiscal year 2022 indicates a 23.5% improvement year-over-year. In addition, the Street expects the company’s EPS to rise 48% from the same period last year to $0.95 next year. The company has an excellent earnings surprise history; it surpassed the consensus EPS estimates in each of the trailing four quarters.
Over the past year, the stock has gained 72.6% in price to close the last trading session at $10.39.
It is no surprise that ICL has an overall A rating, which equates to Strong Buy in our proprietary POWR Ratings system. The stock has an A grade for Sentiment, and a B for Growth, Stability, and Quality. In the A-rated Chemicals industry, it is ranked #2 of 88 stocks.
In total, we rate ICL on eight distinct levels. Beyond what we have stated above, we have also given ICL grades for Momentum and Value. Get all the ICL ratings here.
Yara International ASA (YARIY)
YARIY is an Oslo, Norway-based producer, distributor, and seller of nitrogen-based mineral fertilizers and related industrial products. The company operates through three segments: Sales & Marketing, New Business, and Production. It supplies its products under six brands: YaraBela, YaraLiva, YaraMila, YaraTera, YaraVera, and YaraVita.
In January, YARIY partnered with Linde Engineering to construct and deliver a 24MV green hydrogen demonstration plant at the company’s ammonia production facility in Norway. The project aims to supply the first green ammonia products to the market by mid-2023. Given rising global climate change concerns, this jointly developed product is expected to be highly demanded.
YARIY’s revenue and other income increased 72% year-over-year to $5.03 billion in the fourth quarter, ended Dec. 31, 2021. Its EBITDA grew 38.2% from its year-ago value to $669 million, while its EPS (excluding currency effects and special items) improved 56.6% year-over-year to $1.19.
Analysts expect YARIY’s revenue to come in at $5.56 billion for its fiscal first quarter (ending March 31, 2022), representing 75.6% growth year-over-year.
Over the past five days, the stock has gained 5.2% in price to close the last trading session at $24.48.
YARIY has an overall B rating, which translates to Buy in our proprietary rating system. Also, it has an A grade for Growth and a B grade for Value, and Stability. Also, it is ranked #5 of 29 stocks in the Agriculture industry.
Click here to see YARIY ratings for Momentum, Sentiment, and Quality.
NTR shares were trading at $97.93 per share on Thursday afternoon, up $4.11 (+4.38%). Year-to-date, NTR has gained 30.23%, versus a -7.63% rise in the benchmark S&P 500 index during the same period.
About the Author: Aditi Ganguly
Aditi is an experienced content developer and financial writer who is passionate about helping investors understand the do’s and don'ts of investing. She has a keen interest in the stock market and has a fundamental approach when analyzing equities.
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