Ahead of Wednesday’s release of its third-quarter results, Raymond James analyst Steve Hansen cut his forecast for Nutrien Ltd. based on a “broad deterioration” in global fertilizer markets.
“[It’s] a pattern largely underpinned by sidelined international buyers, incremental supply, and self-reinforcing feedback loops—irrespective of still attractive crop fundamentals,” he said. “In potash, specifically, international buyers have become strikingly emboldened by six months of persistent price declines, electing to leverage time and defer purchases as long as possible. Given this backdrop, and the associated influence on key spot benchmarks, we now expect Chinese & Indian benchmark contracts to settle flat-to-lower in the coming months, an outcome likely not fully contemplated by the Street.”
For the quarter, Mr. Hansen is now projecting earnings per share of US$4.02, down from US$4.57. His fourth-quarter and full-year estimates slid to US$3.80 and US$16.37, respectively, from US$4.57 and US$17.
“We have trimmed our 2H22 and 2023 estimates to account for the aforementioned macro/pricing backdrop. With the company scheduled to release its 3Q22 results on Nov-2-22 (after-market, call next morning), we will be looking for additional color/clarity on the company’s potash price outlook & associated expansion plans,” he said.
Maintaining an “outperform” recommendation for Nutrien shares, Mr. Hansen’s target dropped to US$110 from US$125. The average is US$111.05.
“Notwithstanding these short-term dynamics, we reiterate our OP2 rating based upon our constructive view of the current Ag cycle and Nutrien’s robust free cash flow profile and heavily discounted valuation,” he concluded.