Stocks of fertilizer companies Nutrien (NYSE:NTR) (TSE:NTR) and CF Industries (NYSE:CF) were down on Thursday due to significantly lower-than-anticipated third-quarter earnings.
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Fertilizer companies gained from a spike in prices earlier this year triggered by strong demand and tight supply caused by sanctions on Russia and Belarus. However, prices have declined from the peak levels seen in the first half of the year as farmers have reduced fertilizer application to control costs.
Nutrien stock was down 15% at the time of writing, while CF Industries stock fell nearly 7%.
Nutrien Lowers 2022 Earnings Outlook
Nutrien’s Q3 sales increased 36% year-over-year to $8.2 billion, while adjusted EPS surged 82% to $2.51. Q3 performance gained from higher realized prices and solid performance of the company’s retail business, which more than offset lower fertilizer sales volumes. However, the company lagged analysts’ EPS estimate of $3.94 and revenue expectation of $8.65 billion.
The company experienced a temporary decline in potash purchasing in North America and Brazil in Q3, which has affected sales volumes and realized prices for the second half of the year. Consequently, Nutrien lowered its full-year adjusted EPS guidance to the range of $13.25 to $14.50 from the previous outlook range of $15.80 to $17.80.
Nutrien’s CEO Ken Seitz, stated, “However, the underlying demand drivers remain strong and global fertilizer supply challenges still persist, creating a supportive environment for Nutrien as we look ahead to 2023 and beyond.”
Is Nutrien Stock a Good Buy?
The Moderate Buy consensus rating for Nutrien stock is based on nine Buys, three Holds, and one Sell. The average NTR stock price target of $106.19 suggests 28% upside potential. The U.S.-listed shares of Nutrien were up 10.4% year-to-date (as of November 2).
CF Industries Significantly Missed Q3 Earnings Estimates
CF Industries’ GAAP Q3 earnings per share (EPS) jumped to $2.18 from a loss of $0.86 in the prior-year quarter, thanks to higher sales and margins. However, analysts were expecting GAAP EPS of $3.40 and adjusted EPS of $3.35.
Net sales grew 70.4% to $2.32 billion, fueled by higher average selling prices amid tight global supply and year-over-year growth in sales volumes. However, sales fell short of analysts’ estimate of $2.39 billion.
CF Industries’ CEO Tony Will stated, “The conditions that have supported nitrogen prices for the last year – reduced global supply availability from lower operating rates due to high energy costs for marginal production in Europe and Asia – show no signs of abating.”
The CEO further added that the company anticipates the global nitrogen supply-demand balance to continue to be tight, providing attractive margin opportunities for low-cost producers.
Meanwhile, CF Industries’ board approved a new $3 billion share repurchase program, which will begin once the existing program ($1.5 billion remaining) completes by the end of 2024. The new program will be effective through the end of 2025. The company repurchased about 12.7 million shares for $1.12 billion during the first nine months of this year.
Is CF Industries a Good Stock
Wall Street is cautiously optimistic on CF Industries, with a Moderate Buy rating based on five Buys and three Holds. The average CF stock price target of $122.75 suggests 19% upside potential. Shares have surged by a whopping 46% year-to-date.
