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Nutrien Ltd T.NTR

Alternate Symbol(s):  NTR

Nutrien Ltd. is a Canada-based provider of crop inputs and services. The Company operates a network of production, distribution and ag retail facilities to serve the needs of growers. The Company operates through four segments: Nutrien Ag Solutions (Retail), Potash, Nitrogen and Phosphate. The Retail segment distributes crop nutrients, crop protection products, seed and merchandise. Its Retail provides services directly to growers through a network of farm centers in North America, South America and Australia. Its retail operations serve growers in seven countries across three continents. The Potash, Nitrogen and Phosphate segments are differentiated by the chemical nutrients contained in the products that each produces. The Company produces and distributes about 26 million tons of potash, nitrogen, and phosphate products for global agricultural, industrial, and feed customers. The Company’s agriculture retail network services over 500,000 grower accounts worldwide.


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Post by retiredcfon May 05, 2022 11:39am
140 Views
Post# 34658761

RBC

RBCTheir upside scenario target is US$150.00. GLTA

May 4, 2022

Nutrien Ltd.
Favourable ag tailwinds expected to continue

Outperform

NYSE: NTR; USD 107.31; TSX: NTR

Price Target USD 135.00

Our view: We think underlying ag fundamentals remain very strong and should continue to support elevated fertilizer prices and outsized cash generation. Export restrictions on Belarus/Russia should keep potash supply very tight for several years while high global natural gas prices keep nitrogen prices elevated. We expect Nutrien to benefit with increased potash capacity and better nitrogen ops, which supports plans for significant cash return to shareholders over the next several years.

Key points:

Ag fundamentals remain favourable, supporting strong fertilizer demand.

In market-oriented regions (i.e., US, Brazil, EU), we believe demand remains strong given favourable crop profitability, but some buyers may be holding back on purchases in the hope of lower prices while poor weather has hurt recent demand. In state-backed ag sectors (i.e., India) and locally driven markets, farmers may struggle to afford fertilizers despite a desire for higher applications. The term “demand destruction” is often used but doesn’t properly reflect current market conditions—given high global crop prices, we think demand intentions are strong, but supply shortages and high prices present different challenges across different regions. Key points to consider: lower fertilizer use likely means lower crop yields, higher crop prices, and higher fertilizer demand later; lower fertilizer use now means drawing on soil banks that will need to be replenished later; and any decline in fertilizer prices would likely see a strong demand response.

Potash remains constrained; could take several years to normalize. Our data shows no recent Belarusian offshore exports and Russia at ~30–40% of normal. We expect Russian volumes to return over time as buyers/ exporters work around sanctions and logistics challenges, but Belarus is constrained by export capacity that could take at least two years to resolve. Long-term, we see delayed expansions in Belarus/Russia, higher market concentration with Belarus selling via Russia, and some market bi- furcation with Belarus/Russia selling to lower-priced markets. While prices will likely normalize over time as Belarus/Russia return to the market, we expect them to remain elevated at $950/$750/$640/$400 per tonne Brazil potash in 2022/23/24/25 vs. $300/tonne in 2014–20. We expect Nutrien to increase potash production into this environment, producing 15Mt/16Mt/17Mt in 2022/23/24, up from 14Mt in 2021.

Outsized cash generation supports shareholder returns and debt reduction. We forecast ~$8–9B FCF generation (~15% yield) annually from 2022 through 2024, with potential upside if fertilizer prices stay higher for longer—at current spot, we estimate FCF at $12B (19% yield) in 2023. We expect management to announce further share buybacks above the current $2B commitment and pay off ~$1B debt due in the next 1–2 years.

Reiterating Outperform rating and $135 price target. We maintain our 2022E and 2023E EBITDA at $15.2B and $13.8B


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