Nutrien Ltd.
Q4/23 slightly below expectations, while 2024 guide about in-line, focus on capital return
NYSE: NTR | USD 50.44 | Outperform | Price Target USD 75.00
Sentiment: Neutral
Our view: We view the Q4/23 results as slightly below expectations while 2024 guidance ranges are about in-line, with a recovery in Retail segment EBITDA and slight growth in potash volumes. We think Nutrien mostly delivered a quarter and guide as expected, with a renewed focus on cash generation and capital return, highlighted by a moderate dividend increase and share repurchase authorization. We continue to view shares as undervalued and see steady execution along with ag/fert market stabilization as a path to recovering valuation.
Actual: $1.08B EBITDA | RBC $1.17B | Consensus: $1.15B
Summary: Q4/23 results were slightly below our expectations due to lighter Retail earnings and higher corporate costs. Retail segment performance was lower than expected ($229M EBITDA vs. $260M RBCe) as stronger sales ($3.5B actual vs. $3.4B RBCe) was offset by softer margins (5.6% EBITDA margin actual vs. 7.7% RBCe) due to continued pressure on crop protection margins in Brazil. In Potash, sales volumes were higher than expected (3.3Mt actual vs. 3.2Mt RBCe), offset by lower realized prices ($235/ tonne actual vs. $259/tonne RBCe). In Nitrogen, sales volumes came in above expectations (2.7Mt actual vs. 2.6Mt RBCe), but prices were below our estimates ($321/tonne actual vs. $333/tonne RBCe), while costs were lower due to low natural gas costs ($3.30/mmbtu actual vs. $3.50/mmbtu RBCe). Phosphate realized prices and volumes were both better than expected ($627/ tonne vs. $618/tonne RBC, 753Kt actual vs. 595Kt RBCe), but costs were above expectations.
Key updates:
• 2024 guidance mostly in line with RBCe: Nutrien announced 2024 Retail EBITDA guidance of $1.65-$1.85B, -6% below RBCe of $1.86B. Potash sales volume guidance at 13.0-13.8Mt was in line with 13.4Mt RBCe. Nitrogen sales volume guidance of 10.6-11.2Mt is also in line with 10.9Mt RBCe. Phosphate sales volume guidance of 2.6-2.8Mt is above RBCe of 2.4Mt. Nutrien also provided capex guidance of $2.2-$2.3B, in line with RBCe of $2.2B.
• Raised dividend by 2% and authorized new share repurchase program: Nutrien raised the quarterly dividend to $0.54/sh ($2.16/sh annualized), up 2% from the previous level. The company also announced Board authorization for a repurchase program of up to 5% of shares outstanding over the next 12 months.