Scotia Capital Scotia Capital analyst Ben Isaacson expects the Russia-Ukraine conflict to lead to “materially higher” in earnings for North American fertilizer companies in 2023 and 2023.
However, he currently sees little upside to their equities.
“It’s hard to see continued outperformance near-term,” said Mr. Isaacson, who downgraded both Saskatoon-based Nutrien Ltd. and CF Industries Holdings Inc. to “sector perform” recommendations from “sector outperform” in a research note released Monday.
“Are the good times over? No, we don’t think they are. However, from a risk-adjusted point of view, we don’t see a lot of upside to the equities based on, what some may call, slightly aggressive price deck revisions (both Scotia ‘22/23 and mid-cycle). The ROR on all but one of our names is now less than 10 per cent.”
The analyst hiked his target for Nutrien shares to US$118 from US$90. The average on the Street is US$104.69, according to Refinitiv data.
His CF target rose to US$118, above the US$93.58 average, from US$81.
“The only remaining fertilizer producer we believe investors should continue accumulating is K+S,” said Mr. Isaacson. “We would not be surprised to see the North American equities pull back a little in the summer, especially if/when prices begin to roll over following the spring demand surge (panic). In other words, we see better entry points for CF, MOS, and NTR later in the year. For North American investment mandates, NTR remains our preferred name.”