Aside from the generous dividend yield, Nutrien is also buying back 5% of its outstanding shares to enhance shareholder returns.
To boost sagging earnings, a $200m cost-cutting program should help navigate commodity price cycles and weather challenges. Overall, the outlook for increased demand remains strong as global food security concerns have not abated. This is a solid company with a demonstrated ability to offset price declines with volume gains as it continues to position itself in the most promising markets.
Meanwhile, the stock trades at just 12.0 times the company’s forward earnings forecast.
NUTRIEN LTD. (Toronto symbol NTR; www.nutrien.com) is the world’s largest producer of agricultural fertilizers, including potash, nitrogen and phosphate. It ships about 26 million tonnes annually. Nutrien also sells seeds, fertilizers and agricultural products to farmers through some 2,000 stores spread across the Western Hemisphere and Australia.
The company took its current form on January 1, 2018, when Agrium Inc. (old symbol AGU) merged with rival Potash Corp. of Saskatchewan (old symbol POT).
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Potash sales volumes in the three months ended June 30, 2024, rose 5.4% to 3.56 million tonnes, which helped offset a 28.9% drop in selling prices. Nitrogen sales volumes fell 4.3% as wet weather impacted the timing of nitrogen applications on farmers’ fields. As well, sales at its retail business, which sells fertilizer and seeds to farmers, declined 11.5% due to lower selling prices.
Mining Stocks: Nutrien’s Revenue and earnings dip should be temporary
As a result of those factors, Nutrien’s revenue in the quarter fell 12.9%, to $10.16 billion from $11.65 billion a year earlier (all amounts except share price in U.S. dollars). That missed the consensus forecast of $10.89 billion.
The lower revenue also cut company earnings before unusual items by 16.8%, to $1.16 billion from $1.39 billion. Due to fewer shares outstanding, per-share earnings declined at a slower rate of 7.5%, to $2.34 from $2.53. That beat the consensus estimate of $2.13.
Thanks to new contracts with China and India, Nutrien expects 2024 potash sales volumes will range between 13.2 million tonnes and 13.8 million tonnes; that’s up from its previous forecast of 13.0 million tonnes to 13.8 million tonnes. At the same time, the company aims to cut $200 million U.S. from its annual costs by the end of 2026.
With the April 2024, payment, the company raised your quarterly dividend by 1.9%. Investors now receive $0.54 U.S. a share instead of $0.53 U.S. The new annual rate of $2.16 U.S. yields a high 4.4%. Nutrien also plans to buy back 5% of its outstanding shares over the next year.
Meanwhile, the stock trades at an attractive 12.0 times the company’s projected 2025 earnings of $4.01 U.S. a share.
Recommendation in The Successful Investor: Nutrien Ltd. is a buy.
