Scotia Capital analyst Ben Isaacson thinks the risk-reward proposition for Nutrien Ltd. is currently “in favour” of a long position. However, he warned it could be a “slow grind through the typical summer doldrums for the ferts.”
“With few macro-, commodity-, or company-specific catalysts unfolding in NTR’s favour, it’s understandable why those in the Value Trap camp are patting themselves on the back,” he said. They’ve been right, plain and simple.
“But, the set-up for 2H through ‘25 doesn’t look so bad, either. First, and once again, weather is negatively impacting the corn crop, which has seen futures lift to nearly $5/bu for Dec ‘24/25/26 vs. spot at marginal cost of $4.10 to $4.25/bu. Second, we think the potash market will tighten from now through ‘26/27, at least until BHP is halfway through its ramp. Third, while we certainly don’t like the long-term prospects for NA nitrogen, the balance of the year looks ok, both in terms of gas spread development and re: insufficient supply to keep up with demand growth. Fourth, on retail, the business is back on track, despite an overall challenged backdrop in Brazil, particularly for CP. Fifth, NTR has an opportunity to use its June 12 investor day as a meaningful stock catalyst - we run through what to expect below. This is the opportunity we see for NTR to close the value gap vs. remain a value trap.”
Ahead of its June 12 investor day, the analyst trimmed his target for Nutrien shares to US$66 from US$67, keeping a “sector outperform” rating. The average on the Street is US$68.22.
“We rank MOS [Mosaic Co.] ahead of NTR in 2H, which generally lines up with our preference for P > K > N [phosphorus, potassium and nitrogen] through 2H, as well as a bias for a little more wholesale/Brazil recovery torque over retail exposure at the bottom of the cycle,” said Mr. Isaacson. “That said, we continue to see good value in NTR in the $50s.”