3 Fertilizer Stocks Booming with Rising Food Prices
As food prices continue to rise due to supply chain constraints and low agricultural output, the fertilizer industry should benefit. So, we think it could be wise to bet now...
As food prices continue to rise due to supply chain constraints and low agricultural output, the fertilizer industry should benefit. So, we think it could be wise to bet now on fundamentally sound fertilizer stocks Nutrien (NTR), The Mosaic Company (MOS), and Intrepid Potash (IPI). Let’s discuss.
Supply chain disruptions, transportation issues, labor shortages, and the negative impact of climate change on agricultural output continue to drive food prices higher. According to the UN Food and Agriculture Organization’s (FAO) monthly Food Price Index, global food prices rose nearly 33% in September 2021 compared to the year-ago period.
Furthermore, rising population and dietary shifts are expected to increase food demand, helping the fertilizer industry grow. According to a Global Market Insights report, the fertilizer market is expected to grow at a 2.4% CAGR from 2021 to 2027.
So, we think it could be wise to scoop up the shares of fundamentally strong fertilizer stocks Nutrien Ltd. (NTR), The Mosaic Company (MOS), and Intrepid Potash, Inc. (IPI). They are expected to generate significant returns in the coming months.
Nutrien Ltd. (NTR)
Headquartered in Saskatoon, Canada, NTR provides crop inputs, services, and solutions. The company operates through four segments: Retail Ag Solutions (Retail); Potash; Nitrogen; and Phosphate. Its offerings include potash, nitrogen, phosphate, and sulfate products, and it also distributes crop nutrients, crop protection products, seeds, and merchandise products through approximately 2,000 retail locations.
On July 29, 2021, NTR announced its partnership with EXMAR to develop and build a low-carbon, ammonia-fueled vessel. Raef Sully, the company’s Executive Vice President and CEO of Nitrogen and Phosphate, said, “This initiative demonstrates how we are taking action to achieve our Feeding the Future Plan’s 2030 sustainability commitments, which include investing in low-carbon ammonia innovations.”
NTR’s total revenues increased 15.8% year-over-year to $9.76 billion for the second quarter, ended June 30, 2021. Its gross profit margin came in at $2.88 billion, up 32.9% year-over-year. Its net earnings increased 45.5% year-over-year to $1.11 billion, while its EPS came in at $1.94, up 44.8% year-over-year.
For its fiscal year 2021, NTR’s revenue and EPS are expected to grow 25.1% and 177%, respectively, year-over-year to $25.09 billion and $4.99. In addition, it surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 72% in price to close yesterday’s trading session at $69.50.
It’s no surprise that NTR has an overall B rating, which equates to a Buy in our POWR Ratings system. The POWR Ratings assess stocks by 118 different factors, each with its own weighting.
In addition, NTR has a B grade for Sentiment. NTR is ranked #5 of 31 stocks in the Agriculture industry. Click here to see the additional POWR Ratings for NTR (Stability, Value, Growth, Quality, and Momentum).
Note that NTR is one of the few stocks handpicked by our Chief Growth Strategist, Jaimini Desai, currently in the POWR Growth portfolio. Learn more here.
The Mosaic Company (MOS)
One of the world’s leading integrated producers of concentrated phosphate and potash, MOS in Plymouth, Minn., serves customers in roughly 40 countries. The company operates through three segments: Phosphates; Potash; and Mosaic Fertilizantes.
In August 2021, MOS’ board of directors approved a new $1 billion share repurchase authorization. In addition, the company completed the early redemption of $450 million in notes that were due November 2021, representing its first step toward reaching its goal of retiring $1 billion of debt over time. These measures are expected to help MOS further strengthen its balance sheet.
For the second quarter, ended June 30, 2021, MOS’ net sales increased 37% year-over-year to $2.80 billion. The company’s gross profit came in at $752.30 million, up 192.7% year-over-year. Its net income came in at $437.20 million, up 822.4% year-over-year. Also, its adjusted EPS came in at $1.14, up 850% year-over-year.
MOS’ revenue is expected to grow 41.5% year-over-year to $12.29 billion in its fiscal year 2021. Its EPS is estimated to grow 447.1% year-over-year to $4.65 in the current year. Also, it surpassed the Street’s EPS estimates in each of its trailing four quarters. Over the past year, the stock has gained 100.3% in price to close yesterday’s trading session at $39.54.
MOS’ POWR ratings reflect this promising outlook. The stock has an overall B rating, which equates to a Buy in our proprietary rating system. In addition, it has an A grade for Growth, and a B grade for Value.
Intrepid Potash, Inc. (IPI)
IPI produces and sells potash and langbeinite products internationally. It operates through three segments: Potash; Trio; and Oilfield Solutions. It also offers salt for animal feeds, industrial applications, pool salts, and treatment of roads and walkways. IPI is based in Denver, Colo.
On August 2, 2021, Bob Jornayvaz, IPI's Executive Chairman and CEO, said, "Since announcing another potash and trio price increase in June, the fertilizer market continued to move up with buyers eager to secure supply in a limited market. We began our HB production season this week and expect to start our Utah solar solution mining facilities in early September. We are well positioned to supply our customers when the fall season begins and have already received strong buyer interest in new orders for fourth quarter delivery.”
IPI’s sales increased 46.2% year-over-year to $67.89 million for its fiscal second quarter, ended June 30, 2021. The company’s operating income came in at $10.3 million, compared to a $8.21 million loss in the prior-year quarter. Also, its net income came in at $19.50 million compared to a $8.87 million loss in the year-ago period, while its EPS was $1.46 compared to a loss of $0.68 in the prior-year quarter.
Analysts expect IPI’s revenue to be $237.96 million in fiscal 2021, representing a 20.8% year-over-year rise. In addition, the company’s EPS is expected to increase 228.7% year-over-year to $2.15 in the current year. Also, it surpassed the Street’s EPS estimates in three of the trailing four quarters. Over the past year, the stock has gained 250.4% to close yesterday’s trading session at $33.85.
IPI’s strong fundamentals are reflected in its POWR Ratings. The stock has an overall B rating, which indicates a Buy in our proprietary rating system.
In addition, IPI has a B grade for Value, Growth, Quality, and Momentum. Within the Agriculture industry, it is ranked #7. Also, click here to see the additional POWR Ratings for Stability and Sentiment for IPI.
NTR shares rose $0.33 (+0.47%) in premarket trading Monday. Year-to-date, NTR has gained 49.34%, versus a 17.97% rise in the benchmark S&P 500 index during the same period.
About the Author: Riddhima Chakraborty
Riddhima is a financial journalist with a passion for analyzing financial instruments. With a master's degree in economics, she helps investors make informed investment decisions through her insightful commentaries.
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