Citing “near-term headwinds for fertilizer prices and sentiment,” Nutrien Ltd. was removed from RBC’s “Top 30 Global Ideas for 2023″ in a second-quarter update released on Monday.
“Although seasonally stronger North American spring fertilizer demand has started to emerge, we currently see limited price upside over the next few months before the typical summer slowdown,” the firm said. “That said, Nutrien remains our preferred fertilizer stock and we continue to see a very constructive long-term fundamental outlook for ag and fertilizers supporting robust free cash flow generation for several years.”
Analyst Andrew Wong maintained an “outperform” rating and US$110 target for the Saskatoon-based company’s shares. The average on the Street is US$96.40.
Other Canadian companies remaining on the list of “high-conviction, long-term ideas” include:
* Alimentation Couche-Tard Inc. with an “outperform” rating and $68 target. Average: $74.47.
Analyst Irene Nattel: “Despite challenging macro backdrop, multiple avenues for growth, underpinned by: (1) top-line momentum from a more-focused, data-driven approach to merchandising/promotional strategies; (2) well-defined initiatives and strategies to optimize procurement; (3) focus on localized merchandise pricing, promotions, and assortments; (4) innovative fuel initiatives, including rollout of Circle-K gas; (5) cost optimization; (6) network development; and (7) opportunistic acquisitions.”
* Element Fleet Management Corp. with an “outperform” rating and $27 target. Average: $23.33.
Analyst Geoffrey Kwan: “Four key themes drive our positive view of EFN: (1) attractive growth – We forecast that EFN’s EPS could grow at a mid-teens CAGR over the next five years, driven by new client wins, organic growth within existing customers, and significant returns of capital; (2) multiple potential catalysts (see below); (3) strong defensive attributes – EFN faces minimal credit/residual risks and tends to have long-term contracts(3–5 years) with high retention rates (approximately 99 per cent ); and (4) attractive valuation – we see high EPS growth as a key driver of valuation and potential valuation multiple expansion.”
* Telus Corp. with an “outperform” rating and $33 target. Average: $31.47.
Analyst Drew McReynolds: “We view 2022 as a pivotal turning point for TELUS asthe company transitions into a new post-FTTH build / 5G phase. The provision of 2023 guidance confirmsthat the company has emerged with a distinctively different financial and operating profile relative to most global telecom peers. With FTTH coverage reaching 85 per cent of the targeted broadband footprint, enhanced capex flexibility should enable TELUS to capitalize on 5G without meaningful capital constraints, opportunity costs or FCF impairment. Longer term, under certain competitive and regulatory conditions, we continue to see strong strategic and financial rationale for TELUS to explore a transformational re-organization that can fully unlock the value of core infrastructure assets and core technology assets”